A new month saw some relief for the beleaguered USD. But not much. After a five month losing streak, its longest since 2011, the USD was up smalls overnight. Equities may gains on both sides of the Atlantic, as oil prices and yields eased.
Annual inflation in the US core PCE deflator came in at 1.5%, a tick above expectations. This set the stage for the USD to recoup some losses, but other mixed data outcomes capped any budding enthusiasm. Personal incomes were lower than anticipated and construction fell. US manufacturing surveys remained strong and close to expectations.
With some mild gyrations around data releases, the DXY US dollar index currently sits up around 0.2% for the day. USD/JPY briefly dipped under 110.00, as US yields dipped, before paring losses. USD/JPY opens this morning about flat at 110.30.
EU GDP rose 0.6% in Q2, matching expectations. Some of the gloss was taken off it with a mild downward revision to Q1, but annual growth did hit expectations at 2.1%. The data indicate a decent rate of economic expansion is occurring in the region. A strong EU PMI reading adds to the case, although in that survey price pressure remained subdued. Nothing here to dissuade the ECB from starting to discuss over coming months how to taper QE but also nothing to generate urgency. EUR/USD has retreated 0.4% from its highest level since early 2015 up toward 1.1850 yesterday. The pair currently sits around 1.1800. After gaining ground on a solid PMI reading, GBP/USD now sits unchanged on the day at around 1.3200.
NZD, AUD, CAD, and NOK are all lower against the USD overnight as oil gave back part of its large gains over the past week as the market awaits signs of rebalancing. Crude benchmarks are down about 2% over the session.
NZD was unmoved on yesterday morning’s news that the NZ labour party changed its leadership following recent poor poll results. The election is less than two months away, on 23 September. But as oil prices eased overnight, NZD/USD pressed down toward 0.7460 before finding support. The NZD was not helped by dairy prices easing 1.6% at the latest GDT auction, against expectations of a small rise.
NZD/USD opens this morning down around 0.5% at about 0.7470. Today’s Q2 labour market data holds the key to NZD performance today, with any disappointment to robust expectations likely to test downside support initially around 0.7460 ahead of 0.7400. Watch near term resistance around 0.7525 on better than expected data.
A bit of AUD/USD volatility around the RBA decision late yesterday, as the Bank noted a higher AUD is weighing on the outlook for growth and contributing to subdued price pressures. But ultimately the RBA delivered little surprise and an reasonably upbeat assessment of the economy. Overnight AUD/USD has tracked other commodity currencies lower overnight, despite iron ore prices holding up. AUD/USD sits about 0.5% lower this morning around 0.7965. NZD/AUD remains little changed at around 0.9380, just above its 100dma that sits around 0.9370.
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