Global overview
The US dollar continued to reverse from three-month highs – falling for the third day running – after US growth and employment numbers missed expectations. On the other hand, a hot German inflation reading boosted the EUR. The Aussie underperformed after a drop in local inflation.
Greenback lower for third day
The US dollar saw a third day of losses overnight after weaker June-quarter GDP numbers and a big drop in the ADP employment series.
The lower greenback this week has been driven by poor US economic data with Tuesday’s falling in the JOLTS (job openings and labor turnover series) driving the view that the Federal Reserve might have come to an end of its rate hiking cycle.
Overnight, the ADP jobs series fell from 371k new jobs in July to 177k new jobs in August – another sign of the slowdown in the US employment market.
June-quarter GDP also saw a drop from its initial reading of 2.4% to a revised lower 2.1%, the equal weakest reading in a year.
Global sentiment improved on reduced concerns around Fed rate hikes. US bond yields fell. The US’s S&P 500 gained 0.4%.
The USD index dropped 0.4% falling to two-week lows.
Euro stronger after hot German inflation
With the USD weaker, most currencies gained versus the greenback.
The GBP/USD gained 0.6% while the USD/CAD fell 0.1%. The USD/JPY gained 0.2%.
The euro was a notable standout with the EUR higher after a series of stronger inflation readings caused markets to speculate that the European Central Bank might need to raise rates further. Notably, German preliminary annual inflation was up 6.1% in August versus 6.0% expected.
The EUR/USD gained 0.4% as the combination of weaker US data and hotter European data saw rate expectations swing back to the euro’s favor after a recent period of weakness.
The euro remains in focus with total Eurozone inflation due tonight. The US’s personal consumption and expenditure reading – the Fed’s preferred measure of inflation – is also due tonight.
Aussie underperforms after CPI drop
In Asia, the Chinese yuan and Singapore dollar were both broadly unchanged. The kiwi fell.
The Australian dollar also underperformed versus the greenback with the AUD/USD flat on the day.
A sharper-than-expected drop in the July inflation reading, falling on an annualised basis from 5.2% in June to 4.9% in July, saw markets step back from fears of further Reserve Bank of Australia hikes.
The market sees a less-than 1.0% chance of a hike when the RBA meets next week.
Greenback extends losses as GDP slips
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 28 August – 2 September
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
