Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US bond yields, crypto lead losses
The Australian dollar and other risk-sensitive currencies were weaker overnight as growth concerns around the US economy continued to weigh.
The US economy has been the clear leader over the last three years but a recent slowdown in key data has sparked fears the US might be facing a slowdown.
In markets, the shift has been most notable in US bond markets, with the US ten-year bond yield dropping from 4.63% to 4.30% in just two weeks.
Cryptocurrency markets have also tumbled with Bitcoin falling from USD106k to USD88k over the last month.
US shares have been less affected with the S&P 500 down only 3.3% from the recent highs but the so-called Magnificent Seven index of leading tech stocks is down 12.4%. since mid-December.
In FX markets, the AUD/USD fell 0.1% as it extended losses from last week’s two-month highs.
The NZD/USD fell 0.2%. The USD/SGD gained 0.2% while USD/CNH was flat.
ECB minutes to test EUR ceiling
This Thursday, the minutes of the most recent European Central Bank meeting will be released.
The January ECB meeting went very smoothly; as anticipated, the guidance remained intact, and the deposit rate was lowered by 25 basis points.
Madam Lagarde did note that the ECB Governing Council thought the neutral rate was slightly higher than pre-pandemic.
After the early-February headline-driven whipsaw, EUR/USD faces resistance around the 1.053 Dec 78.6% retrace, 1.0533 Jan 27 high, and 1.0552 Sep 38.2% retrace.
Following the impulsive decline from the high of 1.1214 on September 25, the Nov-Feb price action now appears to be a possible base pattern, potentially leading to further EUR/USD gains.
In the AUD/EUR, the euro strength could see the AUD/EUR fall below 0.6000. For EUR/SGD wise, it will need to break the 50-day EMA of 1.4069 to be on an upward trend.
BOT hold can’t save fragile THB
We anticipate that the Bank of Thailand will maintain its policy rate at 2.25% today. Since the Bank of Thailand stated that it wishes to maintain the small policy space. In Asia, we expected the BOT will maintain its policy rate at 2.25% today. Any effectiveness of a cut could be diminished during the period of uncertainty and while the MPC continues to assess global policy uncertainty, which is likely to take some time.
However, we anticipate that the BOT will sound dovish in its policy statement by highlighting negative risks to the economic forecast and reiterating its guidance that it is prepared to alter its policy, if needed, which was absent from the last two MPC statements.
In December, we anticipate dissenting votes for a 25bps cut from a unanimous “on hold” conclusion.
We predict a cut in April, but all of these variables should be viewed as dovish outcomes that pave the way for one. USD/THB is currently at its two-month low. The next key resistance for USDTHB to resume its upward trend will be to break the 50-day EMA of 33.95 and 200-day EMA of 34
Global bond yields slide on slowdown worries
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 24 February – 1 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.