MARKET DEVELOPMENT – USD[1] HITS FRESH 16-MONTH HIGH
USD: The US dollar rose to hit a fresh 16 month high as short-term drivers come into effect. Mentioned on Monday[2], month-end rebalancing suggested strong USD buy signals, while today’s Federal Reserve Balance sheet unwind is expected to lead to the second largest net negative dollar liquidity impact, which typically supports the dollar. Alongside this, today’s ADP employment report beat expectations, keeping the USD supported. Eyes turn to Friday’s NFP report.
EUR: The Euro[3] is quickly approaching key support at 1.13 amid the uptick in the US Dollar[4], while large Euro selling through EURGBP[5] has also weighed on the single currency. On the data front, headline inflation and core inflation matched estimates, however, core inflation at 1.1% is still some way from reaching the ECB’s price target.
GBP: After moving to 30pips of hitting the YTD low (1.2660), the Pound[6] has been among best performing G10 currency in today’s session. Largely as a by-product of the unwind seen in EURGBP, which saw a notable bid in yesterday’s session on month-end demand.
AUD: The Australian Dollar[7] is slightly softer this morning following a slew of negative data surprises in the Asian session. Headline CPI printed in-line with expectations, however the RBA’s preferred measure of inflation (trimmed mean), underwhelmed analyst estimates, consequently, taking the Aussie below 0.71 against the greenback. Elsewhere, China Manufacturing PMI fell short of consensus, confirming the slowdown in Chinese growth as trade wars continue to bite, which added to the Aussie selling. However, much of the selling has been somewhat limited with corporate M&A flow
