Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Aussie jumps to six-month highs
The Australian dollar closed at the highest level since November overnight after a weaker US manufacturing reading hit the US dollar.
The key ISM manufacturing report came in at 48.5 – below the 49.3 expected – in another sign of a slowdown in US manufacturing activity. Other US manufacturing numbers also missed forecasts while the “prices paid” component was also lower.
The USD tumbled on the news with the US dollar index down 0.7% as it fell to the lowest level since 22 April.
The Aussie and kiwi led the charge higher. The AUD/USD gained 1.0% while NZD/USD gained 1.2%.
The USD/CNH gained 0.1% while USD/SGD fell 0.5%.
Greenback also pressured with Waller open to cuts
Growing expectations that the US Federal Reserve might be willing to cut interest rates also weighed on the USD.
In line with the negative risks to employment and economic activity brought on by trade policy, Fed Governor Christopher Waller stated that he still sees a route to rate cuts later this year.
He recommends seeing through a brief increase in price growth, even though tariffs should exacerbate inflation in the “coming months.”
At a Bank of Korea conference in Seoul, Waller stated, “I would be supporting ‘good news’ rate cuts later this year, provided that the labor market stays strong, that underlying inflation keeps moving toward our 2% target, and that the effective tariff rate settles close to my lower tariff scenario,” according to Bloomberg.
The “smaller-tariff” scenario assumed a 10% average tariff and that higher nation and sector-specific charges would be negotiated lower over time, while his “large-tariff” scenario envisaged an average trade-weighted tariff on goods of 25% that persisted for “some time.”
Euro gains as EU looks to strike back
According to Reuters, the European Commission stated on Saturday that the EU is ready to strike back against US President Trump’s increase in steel and aluminum tariffs.
“Consultations on additional countermeasures are presently being finalized by the European Commission.
According to a spokeswoman, “existing and additional EU measures will automatically take effect on July 14 — or earlier, if circumstances require — if no mutually acceptable solution is reached.”
EUR/SGD might be poised for correction given ECB is expected to cut 25bp this week with dovish commentary.
Next key support lies on 21-day EMA of 1.1297 and 50-day EMA of 1.1179, where EUR buyers may look to take advantage.
On the other hand, the AUD/EUR was higher on Monday as it extended gains from one-month lows, thanks mainly to the AUD’s recent outperformance.
Aussie ends at highest level since November 2024
Table: seven-day rolling currency trends and trading ranges
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Calendar: 19 – 24 May
All times AEST
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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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