Daily analysis 09/9/2024

9. 9. 2024 - Josef Brynda

Latest news

• The US dollar ended last week choppily, as the jobs report failed to resolve the debate about the pace of Fed easing.
• Australian dollar weakness was driven by lower commodity prices, especially the continued decline in iron ore prices.
• Other commodity currencies such as the New Zealand dollar, Norwegian krone, and Canadian dollar also underperformed.
• Safe havens like the Swiss franc closed the week in gains.
• The Canadian dollar was also weighed down by disappointing Canadian jobs data, where unemployment rose more than expected.
• The euro closed the week higher despite Friday losses, with the ECB meeting being the key event to watch this week.
• The mixed US jobs report for August showed lower-than-expected job growth but also a lower unemployment rate.
• The debate between a 25 or 50 basis point cut at the Fed's next meeting remained unresolved.
• The market is still pricing in 34 basis points of rate cuts for next week's Fed meeting.
• Attention now turns to CPI data to be released this week.
• Fed Governor Waller stated he would advocate for front-loading rate cuts if appropriate.
• Japan's Q2 GDP came in weaker than expected, with annual growth of 2.9% versus the expected 3.2%.
• China's broader CPI inflation rose 0.6% year-on-year in August, missing expectations.
• European and US equity futures signal a modest rebound following last week's selloff.
• Uncertainty remains in the US Treasury market about the size of potential Fed rate cuts.
• Traders are now pricing in 30 basis points of cuts for the September meeting, 70 basis points by November, and 112 basis points by year-end for the FED.
• European sovereign bonds strengthened, following trading momentum in the US.
• The European Central Bank is expected to cut rates by 25 basis points to 3.5%.
• Oil trades firmer after closing at its lowest level since June 2023 on Friday.
• Gold traded lower on Friday after failing to reach a new record following the US jobs report.

News summary

• The US dollar ended last week with choppy trading as the August jobs report failed to provide clear direction on the Federal Reserve's easing pace. The mixed report showed lower-than-expected job growth but a lower unemployment rate, leaving the debate between a 25 or 50 basis point cut at the Fed's next meeting unresolved. This uncertainty is likely to keep the dollar volatile in the near term, with traders closely watching upcoming CPI data for further clues.
• Commodity currencies faced pressure, with the Australian dollar weakening due to lower commodity prices, particularly the continued decline in iron ore. The New Zealand dollar, Norwegian krone, and Canadian dollar also underperformed. The Canadian dollar was further weighed down by disappointing domestic jobs data. This trend could continue if global growth concerns persist, potentially benefiting safe-haven currencies like the US dollar and Swiss franc against these commodity-linked currencies.
• The euro closed the week higher despite Friday losses, with the upcoming European Central Bank (ECB) meeting being a key event to watch. The ECB is expected to cut rates by 25 basis points to 3.5%, which could impact the euro's performance against major currencies, particularly the US dollar. Traders will be closely monitoring the ECB's decision and subsequent commentary for indications of future monetary policy direction.
• In Asia, Japan's Q2 GDP came in weaker than expected, while China's CPI inflation missed expectations. These economic indicators suggest potential weakness in these major economies, which could influence trading patterns in Asian currencies, particularly the Japanese yen and Chinese yuan, against other major currencies.
• The forex market is pricing in significant rate cuts by the Federal Reserve, with expectations of 30 basis points of cuts for the September meeting, 70 basis points by November, and 112 basis points by year-end. This aggressive pricing could lead to increased volatility in dollar pairs if actual Fed decisions or economic data deviate from these expectations.
• Overall, the forex market is likely to remain sensitive to economic data releases, central bank decisions, and shifts in risk sentiment. Traders should be prepared for potential volatility, especially in USD pairs, commodity currencies, and the euro as markets digest new information and adjust expectations for monetary policy paths in major economies.

Dollar eases as US job openings fall; safe-haven bid lifts yen

5. 9. 2024 - Josef Brynda

The dollar slipped against most major currencies on Wednesday after July U.S. job openings data signaled a softening labor market, tilting the odds further in favor of larger interest rate cuts by the Federal Reserve.

Traders boosted bets that the Fed will deliver a half-a-percentage-point reduction at its next meeting, following news that job openings in July fell to the lowest level in 3-1/2 years.

Friday's U.S. payrolls report could offer further clues on the timing and pace of Fed rate cuts.

"The U.S. central bank must not keep interest rates too high much longer or it risks causing too much harm to employment, Atlanta Federal Reserve President Raphael Bostic said on Wednesday.

The dollar index, which measures the U.S. currency's strength against six major peers, was down 0.3% at 101.4. The dollar slipped 1% to 144.07 yen, a one-week low, as global financial markets generally avoided riskier assets.

Daily analysis 09/5/2024

5. 9. 2024 - Josef Brynda

Latest news

• Equity markets remain quiet ahead of critical US jobs reports. US stocks declined slightly by 0.2% yesterday after attempting a rebound. Futures indicate a slightly lower opening in Europe and the US.
• Safe haven currencies such as the Japanese yen and Swiss franc are currently in demand. The yen strengthened by 1.2% against the US dollar and 1% against the New Zealand and Australian dollars. The euro failed to break above the 1.10 level against the dollar.
• Oil prices have stabilized after a previous decline due to weak demand. Iron ore fell to its lowest level since 2022, signaling weakness in the Chinese economy. Gold returned to the $2,500 level after maintaining support at $2,470.
• US Treasury yields dropped following the release of weaker job openings data. The 10-year yield fell by 7 basis points to 3.76%. European sovereign bonds also rallied in response to weaker US employment data.
• The JOLTS job openings for July fell to 7.673 million, the lowest level since early 2021. This decline suggests a cooling labor market. The market is now pricing in a possible 50 basis point Fed rate cut in September.
• The Bank of Canada cut interest rates by 25 basis points to 4.25%, marking its third consecutive cut. The market fully prices in 50 basis points of easing by year-end, implying two 25 basis point cuts in October and December.
• Japan's July wage report strengthened the case for further rate hikes by the Bank of Japan. Cash earnings rose 3.6% year-over-year, higher than expected. After adjusting for inflation, wage growth slowed to 0.4% year-over-year.
• German factory orders unexpectedly rose for the second consecutive month, providing rare good news for the country's important manufacturing sector. Demand in July increased by 2.9% from June, against expectations of a 1.7% drop. The increase was due to large-scale orders.
• Important macroeconomic events include the release of UK Construction PMI, Eurozone Retail Sales, and US ADP Employment Change. The US ISM Services Index and weekly reports on oil and fuel inventories are also expected.
• Dollar Tree saw its shares drop 22.2% following worse-than-expected results. Today's focus is on Broadcom's earnings, with analysts expecting a strong quarter with revenue growth of 47% year-over-year.
• The VIX index rose 2.90% to 21.32, signaling increased caution in the market. VIX1D and VIX9D also saw increases, reflecting ongoing uncertainty in the short term. With expected economic reports today, there's a good chance of increased volatility.
• Based on options pricing, the S&P 500 could move up or down by about 42 points (approximately 0.76%). The Nasdaq 100 could move around 202 points (about 1.07%). These expected movements suggest potential for significant market swings.
• Traders now anticipate 61 basis points of ECB rate cuts by year-end and 166 basis points by 2025. For the Bank of England, 43 basis points of cuts are expected by year-end and 136 basis points by the end of 2024.
• The decline in oil prices due to weak demand has paused, with expectations that OPEC+ will delay October supply increases. Key support and resistance levels are now at $75 per barrel for Brent crude and $71.70 for WTI.
• Wheat traded higher for the sixth session in a row after recently hitting four-year lows. Support is provided by the outlook for a poor harvest in Western Europe, leading to short covering in US wheat futures

News summary

• Financial markets are experiencing a period of caution and volatility ahead of critical US jobs reports. Equity markets remain quiet, with US stocks slightly declining and futures indicating lower openings in Europe and the US. Safe-haven currencies like the Japanese yen and Swiss franc are in high demand, with the yen strengthening significantly against major currencies. The euro has failed to break above the 1.10 level against the dollar, despite overall dollar weakness.
• Commodity markets are sending mixed signals. Oil prices have stabilized after a previous decline due to weak demand, with expectations that OPEC+ might delay supply increases. Iron ore has fallen to its lowest level since 2022, signaling weakness in the Chinese economy. Gold has returned to the $2,500 level after maintaining support at $2,470. These movements are impacting commodity-linked currencies and reflecting broader economic concerns.
• Bond markets have rallied in response to weaker US employment data. US Treasury yields dropped following the release of softer job openings data, with the 10-year yield falling by 7 basis points to 3.76%. European sovereign bonds also gained. This trend has led to increased expectations of potential rate cuts by major central banks, including the Federal Reserve, European Central Bank, and Bank of England.
• Economic data releases are shaping market sentiment. The JOLTS job openings for July fell to 7.673 million, the lowest level since early 2021, suggesting a cooling labor market. This has led to speculation about a possible 50 basis point Fed rate cut in September. Meanwhile, the Bank of Canada cut interest rates by 25 basis points to 4.25%, its third consecutive cut. In contrast, Japan's July wage report strengthened the case for further rate hikes by the Bank of Japan.
• Market volatility remains elevated, with the VIX index rising to 21.32. Options pricing suggests potential significant market swings for major indices. Important macroeconomic events on the horizon include the release of UK Construction PMI, Eurozone Retail Sales, US ADP Employment Change, and the US ISM Services Index. These events, along with upcoming corporate earnings reports, are likely to drive further market movements and currency fluctuations.
• Currency markets are reflecting these broader economic trends and uncertainties. The US dollar has shown some weakness following the softer employment data. Activity currencies like the Australian dollar, New Zealand dollar, and British pound are underperforming due to growing concerns about economic risks. Traders are now anticipating significant rate cuts from the ECB and Bank of England by the end of 2024, which could put pressure on the euro and pound sterling. Overall, the forex market remains highly sensitive to economic data releases and central bank policy expectations.

Daily analysis 09/4/2024

4. 9. 2024 - Josef Brynda

Latest news

• Economic growth is slowing, but recession risks remain low. GDP growth is forecasted at 2.5% for 2024 and 1.5% for 2025.
• Potential output continues to grow at a brisk pace, supported by increases in labor supply, solid productivity growth, and fiscal policy-driven demand for manufacturing investments.
• The current low savings rate indicates that consumers' buffers remain weak.
• Slow monetary policy pass-through and a high share of fixed-rate mortgages suggest that rate cuts will not provide a rapid boost to economic growth.
• Inflation forecasts have been adjusted modestly lower, with headline inflation expected to average 2.9% in 2024 and 2.2% in 2025.
• The Federal Reserve is now expected to cut interest rates by 25bp at every meeting from September until June 2025, followed by two final cuts in H2 2025.
• Labor market conditions have cooled faster than expected, but mostly due to a rapidly growing labor force.
• US consumers' savings rates have remained low throughout the post-pandemic period, unlike some European economies.
• Investment growth has slowed down as tight monetary policy impacts businesses' expansion plans.
• Fiscal policy stance is expected to remain expansionary over the coming years, irrespective of the election outcome.
• Potential corporate tax hikes under a Harris administration or extended tax cuts under a Trump administration could have different impacts on economic growth.
• The risk of unsustainable debt dynamics is seen as higher in the case of a Trump victory.
• Strong labor productivity growth has continued to alleviate firms' cost pressures.
• The Fed is expected to cut rates faster than the ECB, reflecting expectations of continuous growth in the US economy's productive capacity.
• Financial conditions have already eased in the markets due to expectations of rapid rate cuts.
• The slow monetary policy pass-through means that the boost to growth will come with a lengthy delay.
• 95% of US mortgages are locked into fixed interest rates, limiting the immediate impact of rate changes on the housing market.
• The Fed prefers a gradual easing cycle, despite market speculation about 50bp cuts.
• The lack of similar slack in the euro area compared to the US economy could lead to divergent monetary policies.
• The continuous growth in the US economy's productive capacity contrasts with the situation in the euro area.
• Futures markets anticipate interest rates will decline to 3.75% by the end of the year.
• Inflation is trending down towards the central bank's 2.0% midpoint target.
• The unemployment rate has been steadily rising over the past year, stabilizing at 6.4%.
• GDP rose at an annualized rate of 2.1% in the second quarter, but growth was driven by potentially transient factors.
• Monthly GDP readings for July displayed stagnation at the start of the third quarter.
• Canada is more sensitive to global trade and housing risks than the US
• Nvidia led a tech sell-off, dropping 9.5%.
• The Australian dollar fell 2% against the Japanese yen in risk-off trading.
• Oil prices fell more than 4% due to muted demand.
• The 10-year Treasury yield had its biggest drop since August 2, ending a five-day rise.
• Key economic data includes Bank of Canada decision, Australia GDP, and US JOLTS job openings.
• US ISM Manufacturing PMI for August rose to 47.2, below expectations.
• Bank of Canada is expected to cut rates by 25 basis points, with a 20% chance of a 50bps cut.
• US stocks had their worst day since August 5, with the S&P 500 dropping 2.1%.
• Treasury futures surged sharply during the early U.S. session.
• Gold dipped 0.26%, while silver fell 1.7%.
• WTI crude futures dropped 4.36%, and Brent fell 4.86% to the lowest since January.
• The US dollar continued to strengthen from its late-August lows.
• The Canadian dollar could be vulnerable due to potential BoC rate cut and weak oil prices.

News summary

• The global economic landscape shows signs of slowing growth, with the US GDP forecasted at 2.5% for 2024 and 1.5% for 2025. Despite this, recession risks remain low. The Federal Reserve is expected to initiate a rate-cutting cycle, with 25bp cuts anticipated at every meeting from September until June 2025. Similarly, the Bank of Canada is likely to cut rates by 25 basis points, with a 20% chance of a 50bps cut. These dovish stances from major central banks could lead to weakness in the USD and CAD in the medium term. However, the Fed's faster rate-cutting pace compared to the ECB might cause the EUR/USD pair to trend lower over time.
• Inflation forecasts have been adjusted lower, with US headline inflation expected to average 2.9% in 2024 and 2.2% in 2025. Labor market conditions have cooled faster than expected, primarily due to a rapidly growing labor force. The US unemployment rate has stabilized at 6.4%, while Canada's rate is expected to tick up to 6.5%. These trends suggest potential pressure on both the USD and CAD, as softer labor markets and declining inflation could reinforce expectations of monetary easing
• Recent market movements indicate a risk-off sentiment. US stocks experienced their worst day since August 5, with the S&P 500 dropping 2.1%. Nvidia led a tech sell-off, plunging 9.5%. In the forex market, the Australian dollar fell 2% against the Japanese yen, reflecting this risk aversion. Such market conditions typically benefit safe-haven currencies like the JPY and CHF, while putting pressure on risk-sensitive currencies like the AUD and emerging market currencies
• Oil prices fell more than 4% due to muted demand, with WTI crude futures dropping 4.36% and Brent falling 4.86% to the lowest since January. This decline in oil prices could negatively impact oil-exporting currencies such as the CAD, NOK, and RUB. Gold dipped 0.26%, while silver fell 1.7%, which might have a modest impact on gold-sensitive currencies like the AUD.
• The continuous growth in the US economy's productive capacity contrasts with the situation in the euro area. This divergence, coupled with different monetary policy trajectories, could lead to significant movements in the EUR/USD pair over the medium term. Additionally, Canada's higher sensitivity to global trade and housing risks compared to the US might result in the CAD underperforming against the USD in periods of global economic uncertainty.

USD at Crossroads: End of Strength or Start of a Crisis?

3. 9. 2024 - Josef Brynda

Daily analysis 09/3/2024

3. 9. 2024 - Josef Brynda

Latest news

• AUD dropped due to weakness in iron ore prices, reflecting China's economic slowdown.
• USD traded sideways in thin trading due to US Labor Day holiday.
• EUR was slightly higher, with ECB's Nagel expected to speak today.
• Focus remains on US labor data this week, starting with ISM Manufacturing today.
• Australian dollar fell back overnight after outperforming on Monday.
• Swiss CPI and GDP data are on the radar today, potentially impacting CHF.
• Markets are pricing 60bps rate cuts from the ECB by the end of the year, the least since July 31st.
• European bonds tumbled as investors brace for new debt issuance and adjust rate cut expectations.
• US ISM Manufacturing data for August is expected at 47.5 vs 46.8 prior.
• Eurozone final manufacturing PMI for August was slightly higher at 45.8, while UK's was unchanged at 52.5.
• Key economic events this week include US JOLTS job openings, ADP employment change, and Nonfarm Payrolls.
• Short-term USD crisis triggers include pronounced US disinflation, carry trade unwinding, or extended speculative short positioning.
• Speculator positioning turned net short on the dollar for the first time since January, raising red flags about further weakness.
• Long-term threats to USD include rising US debt, de-dollarization trends, and potential loss of confidence in the Federal Reserve.
• There's a 33% chance of a 50 basis points cut this month, with a quarter-point reduction fully expected.
• Markets have been anticipating a 25 basis point rate cut by the Federal Reserve for several weeks
• Long-term Treasury yields rose to their highest point since mid-August, supporting the dollar.
• Recent inflation data suggests the Fed might opt for a smaller rate cut.
• A stronger-than-expected payroll number and lower unemployment rate could boost market confidence in growth prospects.

News summary

• The Australian dollar's recent drop due to weakness in iron ore prices, reflecting China's economic slowdown, is likely to continue pressuring the AUD. This trend may extend to other commodity-linked currencies, potentially leading to further depreciation against major currencies like the USD and EUR in the short term.
• With the focus on US labor data this week, starting with ISM Manufacturing and culminating in Nonfarm Payrolls, the USD could see increased volatility. A stronger-than-expected payroll number and lower unemployment rate could boost market confidence in growth prospects, potentially strengthening the USD against most major currencies
• The slight rise in EUR, coupled with ECB's Nagel's expected speech, could provide short-term support for the euro. However, with markets pricing in 60bps of rate cuts from the ECB by year-end, the EUR might face downward pressure in the medium term, especially against currencies from regions with more hawkish central bank outlooks.
• The tumble in European bonds and adjustments in rate cut expectations could lead to increased volatility in currency pairs involving the EUR. This might result in a weaker euro in the short term, especially if US Treasury yields continue to rise, supporting the USD.
• Despite current strength, long-term threats to USD including rising US debt and de-dollarization trends could eventually weigh on the currency. This might benefit alternative reserve currencies like the EUR, JPY, or even emerging market currencies in the long run.
• With speculator positioning turning net short on the dollar for the first time since January, there's a risk of a short-term USD rally if these positions are unwound, potentially leading to gains against most major currencies.
• The disparity in rate cut expectations between the Fed and other major central banks could continue to drive forex markets. If the Fed maintains a more hawkish stance relative to peers, it could support the USD against currencies like the EUR and GBP in the medium term.

Daily analysis 09/2/2024

2. 9. 2024 - Josef Brynda

Latest news

• Chinese equities declined due to persistent signs of economic weakness. This downturn reflects ongoing concerns about China's property sector and overall growth trajectory.
• The US dollar recovered last week, regaining some ground after recent losses. This recovery came despite PCE data suggesting room for Federal Reserve rate cuts.
• The euro headed for its worst week since April, underperforming other major currencies. Softer inflation data and dovish ECB comments contributed to the euro's weakness.
• Crude oil prices slumped as OPEC+ prepared to increase output. This drop was exacerbated by concerns about soft demand, particularly in China.
• Copper and silver prices fell due to worries about China's economic health. These industrial metals are particularly sensitive to Chinese demand and growth prospects.
• Bond markets declined as investors braced for a surge in corporate debt issuance. The anticipation of significant new supply, especially after Labor Day, pressured bond prices.
• Markets are closely watching upcoming US jobs data for insights into the labor market. The August jobs report, along with other employment indicators, could influence Federal Reserve policy expectations.
• Eurozone and UK manufacturing PMIs are in focus this week. These indicators will provide updated information on the state of manufacturing activity in these economies.
• US markets are closed for the Labor Day holiday, potentially leading to reduced trading volumes. This holiday could result in muted market activity at the start of the week.
• Core PCE, the Fed's preferred inflation measure, rose 0.2% month-over-month in July. This data reaffirmed that disinflation is progressing, potentially giving the Fed room to begin easing.
• Euro-area inflation softened further in August, reaching its slowest pace since mid-2021. This easing inflation could provide the ECB with more flexibility in its monetary policy decisions.
• China's PMI data signaled continued economic weakness, with manufacturing remaining in contraction. This data underscores the need for further stimulus measures in China.
• The yield curve steepened, with the spread between 10-year and 2-year Treasury yields tightening. This shift in the yield curve reflects changing expectations about future interest rates and economic conditions.
• Gold trades below $2500, facing a potentially challenging month ahead. Traders are watching key US data to gauge the potential scale and pace of upcoming US rate cuts.
• The Australian dollar weakened relative to other currencies. Market participants will be closely watching RBA Governor speeches this week for potential policy insights.

News summary

• The US dollar has shown signs of recovery, regaining ground against major currencies despite PCE data suggesting room for Federal Reserve rate cuts. This resilience indicates that the dollar may continue to strengthen in the short term. However, the upcoming US jobs report could be a pivotal factor in determining the dollar's trajectory. If the labor market shows signs of cooling, it might reinforce expectations of Fed rate cuts, potentially weakening the dollar in the medium term.
• The euro is experiencing its worst week since April, underperforming other major currencies due to softer inflation data and dovish ECB comments. This weakness, coupled with the dollar's recovery, suggests that the EUR/USD pair may continue to decline in the near term. The upcoming Eurozone manufacturing PMI data will be crucial in determining the euro's direction. If the data shows further weakness, it could exacerbate the euro's decline against the dollar.
• The Australian dollar has weakened relative to other currencies, largely due to concerns about China's economic health With China's PMI data signaling continued economic weakness, commodity currencies like the AUD are likely to face downward pressure. The AUD/USD pair may continue to decline, especially if upcoming RBA Governor speeches hint at a dovish stance.
• The performance of the Canadian dollar is likely to be affected by the decline in oil prices as OPEC+ prepares to increase production. This could put pressure on the CAD, which could lead to a strengthening of the USD/CAD currency pair in the short term.  The Canadian dollar is also coming under pressure due to its debt burden, which has risen significantly over the past year.
• The British pound's performance will largely depend on the upcoming UK manufacturing PMI and its comparison to Eurozone data. If the UK shows relative economic strength, it could support the GBP against the EUR.
• Next week it will be very important to watch the data that decidesount and further development of the major currency pairs, if it turns out that the economy in AMERICA is not weakening at a pace suitable for cutting interest rates, for example, that the unemployment data does not show an increasing pace, speculators could reassess their expectations

Daily analysis 08/28/2024

29. 8. 2024 - Josef Brynda

Latest news

• US dollar recovered on risk aversion and month-end demand.
• EURUSD trades back below 1.11 after German statewide CPI
• Nvidia's shares fell 7% despite earnings beat, impacting tech sector sentiment.
• Atlanta Fed President Bostic hinted at potential rate cuts, affecting USD outlook.
• Australia's July inflation came in higher than expected at 3.5% YoY, supporting AUD.
• Spanish and German CPI data due, potentially impacting EUR.• US Q2 GDP revision and jobless claims to be released, influencing USD.
• Treasury yields ended higher, with the 10-2 yield curve inversion close to turning positive.
• Oil prices dropped on smaller U.S. stockpile reduction and Chinese demand concerns.
• Swiss franc outperformed on haven demand but still declined against USD.
• Japanese yen saw a steeper decline despite earlier gains in Asian session.
• Australian dollar outperformed following July inflation report.
• Canadian dollar reversed lower from over five-month highs.
• New Zealand dollar made solid gains on Thursday, reaching an eight-month high of $0.6295.
• New Zealand's business confidence jumped to the highest level in a decade in August.
• Markets have fully priced in a 25-basis-point rate cut from the Fed next month.
• The dollar index was down 0.07% at 100.94, nearing a 13-month low.
• Euro inched back toward its 13-month high, last trading at $1.1135.
• Sterling rose 0.14% to $1.3209, close to its strongest level since March 2022.
• Australian dollar hovered near an eight-month top, gaining 0.27% to $0.6803.
• Bank of Japan policymakers signaled continued interest rate hikes if inflation stays on course.

News summary

• The forex market is experiencing significant movements driven by a combination of economic data, central bank signals, and market sentiment. The US dollar's recovery on risk aversion and month-end demand is being counterbalanced by expectations of potential rate cuts, as hinted by Atlanta Fed President Bostic. This has led to a weakening dollar index, which is approaching a 13-month low at 100.94. However, after the release of various indices in Germany, the euro corrected against the dollar to around 1.107.
• Major currencies are showing mixed performances against the dollar. The euro is inching towards a 13-month high, trading at $1.1135, while sterling has risen to $1.3209, near its strongest level since March 2022. The Australian dollar is hovering near an eight-month peak, supported by higher-than-expected July inflation data. Meanwhile, the New Zealand dollar has made substantial gains, reaching an eight-month high of $0.6295, bolstered by a surge in business confidence to a decade-high in August.
• The Japanese yen experienced a steeper decline despite earlier gains, while the Swiss franc outperformed on haven demand but still fell against the USD. The Canadian dollar reversed from over five-month highs, likely due to dropping oil prices caused by smaller U.S. stockpile reductions and Chinese demand concerns.
• Upcoming economic data releases, including Spanish and German CPI figures, US Q2 GDP revision, and jobless claims, are expected to further influence currency movements. The market has fully priced in a 25-basis-point rate cut from the Fed next month, which could continue to pressure the US dollar.
• In the tech sector, Nvidia's 7% share price drop despite an earnings beat has impacted overall sentiment, potentially affecting risk appetite in the forex market. Additionally, the Bank of Japan's signals for continued interest rate hikes if inflation persists could support the yen in the longer term.