Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Dollar weaker on weak economic data
Dollar index fell 0.4% to 98.79 as markets digested weak US economic data, particularly ADP employment and ISM Services.
The DXY Index tested 98.67 after the Trump/Putin phone call headlines but recovered to close at 98.79.
In Europe, dip-buying interest in EUR/USD is expected around Thursday’s ECB decision, with regional geopolitical risks seen as potential headwinds.
Risk-sensitive currencies like AUD and NZD outperformed.
Asian currencies showed mixed performance, with CNH tracking broader dollar moves.
SGD gains 0.27% while CNH was up 0.28% overnight.
Contractionary US ISM Services, USD weaker
The US ISM services index dropped from 51.6 in April to 49.9 in May, below the 52-point consensus.
The details don’t seem promising.
The number of new orders dropped from 52.3% to 46.4, the lowest since December 2022.
The one bright spot is that employment increased from 49 to 50.7.
In Asia, USD/SGD is 0.5% away from September 2024 low of 1.2789.
From technical lens, USD/SGD remains under pressure, with the next key resistance levels of 21-day EMA of 1.2928 and 50-day EMA of 1.3051 remain in sight.
Aussie lower after GDP, but remains in the range
The Australian dollar was initially lower on Wednesday after a disappointing March-quarter GDP reading.
Annualised economic growth to 31 March for Australia was reported at 0.2% for the quarter (below the 0.4% forecast) and 1.3% for the year (below the 1.5% consensus forecast).
The AUD/USD later rallied helped by the weaker US dollar.
For now, the AUD/USD remains in the clearly defined trading range, with USD buyers targeting a move back to 0.6500 while USD sellers will look the lower end of the range at 0.6400.
With no major AUD data out over the next 48 hours, the main driver of this market will be Friday night’s US non-farm payrolls report.
Antipodeans gain on dollar weakness
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 2 – 6 June
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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.
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