Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USTs resume bear steepening
USTs faced a sharp bear-steepening continuation, with both breakevens and real rates contributing to the sell-off.
Disappointing US manufacturing data was largely ignored, though some US growth selling was observed. This limited S&P 500’s gains relative to Nasdaq Composite’s.
AUD expected to remain supported, especially if RBA Minutes confirm hawkish risks for the August meeting.
Key events:
Korea CPI expected to show slight moderation
Hong Kong retail sales forecasted to be weak
RBA Minutes release (Tuesday 11:30 AM AEST)
Dollar resilient amid high-for-long rate expectations
We anticipate a little decline in car sales to 15.3 million in June from 15.9 million in May. It should be noted that interruptions brought about by cyberattacks against CDK Global, a provider of software for auto dealers, are mostly to blame for the decline in sales. Vehicle sales were unaffected, according to Cox Automotive and S&P Global, however JD Power revised down their projection. We think that the June and July monthly prints could be noisy and not accurately represent the underlying demand.
We feel that over the medium term, the US high-for-long should sustain the dollar.
Won weakens despite export recovery, pressured by outflows
Due to fewer working days, we anticipate that export growth would slow to 1.4% y-o-y in June from 11.5% in May. The daily average export increase probably decreased to 8.4% y-o-y in June from 9.2% in May after accounting for working days. However, the extremely variable ship exports—which decreased by 40.3% year over year in the first 20 days of the month—were mostly to blame for the downturn. Consequently, we think that the export industry’s fundamental strength—the robust demand for chips—remains intact, as does the broader widespread recovery in non-chip industries.
Retailers’ continued abroad investments and NPS’s continuous USD purchases are pushing Won to weaken despite the external sector in Korea having recovered well. Thus, we are neutral on won.
Aussie dips, testing lower range
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 1 – 6 July
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.
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