Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US dollar stages comeback as Philly Fed comes in hot
The US dollar’s sell-off on Wednesday was short-lived as a red-hot reading from the Philly Fed manufacturing index caused the greenback to rebound.
The Philly Fed number jumped to the highest level since 2022 in another sign of US economic strength, pushing US two-year bond yields back to 5.00% before later easing.
The stronger US dollar saw currencies around the region lower. The AUD/USD and NZD/USD both lost 0.3%.
The USD/SGD gained 0.1% while the USD/CNH was flat.
GBP mostly lower ahead of UK retail sales
Even in the best of circumstances, it may be difficult to predict retail sales, but this time around, the early Easter increases the uncertainty.
Furthermore, the rise in UK sales volumes over the last few months has varied between -3.5% m-o-m to +3.4%. Over a longer period of time, retail sales had a dramatic decline during the Covid pandemic, although they later rebounded rapidly as a result of families’ inability to spend money on services.
As government Covid limitations were loosened, consumers shifted back towards services between the spring of 2021 and the end of 2022, which therefore resulted in a decrease in their retail expenditure. Retail sales have been relatively stable since the beginning of 2023.
We predict a small decline (-0.3% month-over-month) since there’s a possibility that February’s robust non-food spending may reverse.
The pound has been recently weaker as GBP/USD breached critical range support, and at 1.2339–1.2365.
In Asia, we’ve seen the GBP weaken versus the Singapore and HK dollars, but it’s outperformed and recently climbed versus the Australian and NZ dollar.
Malaysian GDP due
Around the region, March-quarter GDP is due from Malaysia.
We anticipate that the Q1 GDP advance estimate will demonstrate a pick-up in growth, from 3.0% y-o-y to 4.0% y-o-y in Q4, driven by the industrial production rebound, which in turn represents the electronics cycle turnaround.
Authorities are stepping up their interactions with government-linked companies in an effort to stimulate inflows, as a result of the ringgit fall.
On MYR, we have a modestly negative view, with rising bond yields historically bad news for emerging market FX markets.
Aussie back near lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 15 – 19 April
All times AEST
*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.
Have a question? [email protected]
Take a deep dive into the trends shaping cross-border payments with our podcast, Converge.
