Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Moody’s downgrade hits USD
The US dollar was weaker in early Monday trading – mostly versus other safe havens – after credit ratings agency Moody’s downgraded US government debt from the highest Aa1 rating to Aaa.
Moody’s now follows S&P, which downgraded US debt in 2011, and Fitch, which cut the US’s rating in 2023.
The greenback was weaker on the news with the biggest losses versus safe havens. The USD/JPY and USD/CHF both fell 0.4% in early Monday trade.
The USD/CNH fell 0.1% while USD/SGD lost 0.2%.
The Australian dollar wasn’t able to capitalise on the USD’s early Monday weakness with the pair buffeted by a choppy 2.3% range last week and ending last week down 0.1%.
Kiwi falls from highs despite manufacturing recovery
The NZD/USD ended lower last week after a volatile 2.1% range with the pair down 0.5%.
Amidst RBNZ interest rate cuts and indications of a broad-based economic rebound, New Zealand’s BNZ manufacturing PMI increased to 53.9 in April from 53.2 the previous month, marking the fourth consecutive month of growth.
Keep in mind that the PMI’s 50 threshold distinguishes between expansion and contraction.
With employment at its highest level since July 2021 and both output and new orders in positive territory, all sub-indices grew.
Looking from a technical lens, NZD/USD is now sitting on both strong 50-day EMA support of 0.5848 and 200-day EMA support of 0.5856.
NZD/USD is now circa 7%+ away from its highs of 0.6379, last seen back in September 2024.
Inflation and RBA cut to set the tone for this week
The week kicks off with key inflation figures, starting with the EU’s final CPI readings (YoY and MoM). The UK’s April CPI will be closely watched for signs of easing price pressures. Japan’s National CPI is expected to show a slight uptick to 3.7% YoY.
The Reserve Bank of Australia’s rate decision on Tuesday dominates the monetary policy calendar, with markets anticipating a 25bps cut to 3.85%. Any deviation from consensus could trigger AUD volatility, while guidance on future easing will influence regional risk sentiment.
Preliminary May PMIs will offer fresh insights into global activity, including Eurozone and UK composite figures. Germany’s IFO Business Climate and final Q1 GDP may signal whether its fragile recovery holds. US existing home sales and new home sales round out the housing data slate.
UK retail sales will test consumer resilience after March’s modest gains, while Canada’s March retail sales could reflect lingering weakness. China’s April retail sales set the tone for Asian demand trends early in the week.
With no major holidays, trading conditions should remain stable, though thinner volumes ahead of the US Memorial Day (May 26th) weekend may amplify moves in late-week sessions.
USD lower after downgrade
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 24 May
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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.
