Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US non-farm employment seen as critical this month
Major US markets continued to weaken overnight with further losses in US equities while the US dollar fell to the lowest level since last year’s US presidential election.
The S&P 500 fell 1.8% while the Nasdaq dropped 2.6% overnight.
The US dollar dopped to the lowest level since 5 November before recovering later in the session.
The AUD/USD, initially higher, turned lower near the major technical resistance at 0.6400 – the three-month highs. The Aussie ended flat on the day.
The kiwi also reversed at three-month highs and ended the session up 0.1%.
In Aisa, the USD/SGD rebounded from four-month lows at 1.3300, reflecting the overnight bounce in the USD. USD/CNH also recovered from four-month lows.
Looking forward, all eyes are on tonight’s US jobs report. Financial markets are looking for 160k new jobs to be added in February with the unemployment rate forecast steady at 4.0%. The report is due at 12.30am AEDT.
Slowing US credit growth may add to USD weakness
Away from US jobs, the US consumer credit report will also be closely watched.
After rising sharply to $40.9 billion in December, consumer credit growth probably slowed to $16.0 billion in January.
January’s weak vehicle sales also suggest that the rise of auto loans has slowed.
The USD experienced significant depreciation, with the DXY Index falling by circa 2% Week-To-Date to its lowest level since November 2024.
The next key support level for the dollar index will be its 200-day EMA of 102.57 of the weekly chart.
CNH faces headwinds amid persistent deflation
Tomorrow, the China CPI will be released.
The Chinese New Year calendar mismatch between 2024 and 2025, which artificially produced a high base for February, is mostly to blame for our expectation that CPI inflation would decline to -0.4% y-o-y in February from 0.5% in January.
Due in significant part to a sequential comeback, we anticipate sequential PPI deflation of -2.0% y-o-y in February, up from -2.3% in January, and sequential CPI inflation to slow to 0.1% m-o-m in February from 0.7% in January.
We continue to have a pessimistic view of the CNH due to the possibility of future tariff hikes and the continued corporate propensity to hoard the USD.
As US tariffs increase, we continue to base our forecast on some CNH weakening, with the authorities maintaining the line at 7.50.
USD buyers may look to take advantage near 50-day EMA of 7.2422.
Greenback recovers from four-month lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 3 – 7 March
All times AEDT
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*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.