Market Update 21/08/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
If you have any questions or would like anything further explained, please don’t hesitate to reach out to your account manager or email info@cafx.com

The equities were flat overnight, with the S&P 500 dipping 0.1%, the Euro Stoxx 50 down 0.3%, and the FTSE 100 falling 1.0%. Meanwhile, bond yields declined, and the USD dropped to its lowest level this year as markets awaits US payroll revisions, FOMC meeting minutes tomorrow and Fed Chair Powell’s speech from Jackson Hole later this week. The US 10-year yield decreased by 5.1 bps to 3.82%.
 
Fed speakers overnight (Waller, Bostic, and Barr) avoided discussing the policy outlook, focusing instead on topics like innovation for inclusion and cybersecurity. This leaves the market looking ahead to Powell’s update at Jackson Hole, scheduled for 2:00 am Saturday (NZT).
 
The USD has weakened for the 3^rd consecutive day, with the US Dollar Index (DXY) dropping to a new low for the year at around 101.36.
 
NZDUSD has been among the top performers over the past 24 hours, climbing further to just over 0.6150 (levels not seen since early July). If US payroll revisions are larger than anticipated, we could see further weakening of the USD, potentially pushing the NZD towards 0.6200-0.6220, a level that has been challenging to sustain in previous attempts this year. On the downside, the 0.6090 – 0.6100 range is likely to offer near-term support if the market is disappointed by its expectations that the Fed will begin cutting rates. Currently, the September Fed meeting has priced in about one and a third cuts, with nearly 4 cuts expected for 2024. Meanwhile, the RBNZ is expected to cut rates 3 times by the end of 2024. As these expectations shift, so too does the currency. We’ll see if upcoming US data, Fed minutes, and Powell’s speech meet market expectations.
 
NZDAUD has risen by 0.5% to 0.9125, and AUDUSD has moved closer to 0.6750. Yesterday, the minutes from the RBA’s latest policy meeting didn’t reveal any new information, but indicated the central bank does not plan to ease monetary policy soon, unlike other major central banks. Instead, RBA is focusing on maintaining or possibly raising interest rates for an extended period. Despite the RBA’s suggestion of holding rates steady, the market anticipates that this period won’t last long, with a rate cut expected by December. The RBA is closely monitoring economic data, placing more importance on it than usual. If inflation data is favourable and the economy shows signs of slowing, the RBA might shift towards a more dovish (rate-cutting) stance.
 
NZDJPY is slightly lower at 89.35. The Bank of Japan (BoJ) released research indicating ongoing inflationary pressure in the economy. According to Bloomberg, the study points to the effects of a persistent labour shortage on wages and changes in how companies are setting prices in the services sector. This research has strengthened the JPY, and combined with a general decline in the USD, has pushed USDJPY down to 145.40.
 
NZDGBP and NZDEUR have both outperformed, with these crosses now trading higher at 0.4720 and 0.5527.
 
The economic calendar is relatively quiet today. Japan’s Trade Balance data will be released just before noon at 11:50 am, followed by New Zealand’s Credit Card Spending at 3:00 pm. Overnight, there are two key events: the BLS will issue its preliminary annual payrolls benchmark revision at 2:00 am, followed by the FOMC Meeting Minutes at 6:00 am NZT.

Here are the latest mid-market rates:

Disclaimer:

The market update provided by Corporate Alliance FX (CAFX) is for reference only and does not constitute a bid, levy, offer or invitation to offer for the financial product, the basis for any contract or commitment, a recommendation for the purchase or sale of any investment instruments, financial, legal, tax, investment advice, investment advice or other opinions. It will not be legally liable for any consequences or losses caused by the information or content involved. 
Corporate Alliance Group Pty Ltd T/A Corporate Alliance FX (CAFX) (ABN 58 167 119 226, AFSL 523351) (i.e. CAFX), CAFX independently holds the Australian Financial Services licence no. 523351 (AFSL), so CAFX is regulated by the Australian Securities and Investment Commission (ASIC) and, and although ASIC is a strictly regulatory body, it does not endorse a specific financial product. ASIC’s regulation of CAFX applies to all services under the financial licence held by CAFX, including the issuance of foreign exchange settlement, foreign exchange payments, foreign exchange risk control, hedging, market making and providing financial advice.