Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback tumbles to four-month lows
The US dollar continued to fall overnight, down for the third straight session this week, as markets turned wary on US growth due to tariff worries.
The euro and British pound surged with markets hopeful Europe and the UK could avoid tariffs while expectations of increased defense spending saw the euro outperform.
This week’s moves bucked the recent trend of USD outperformance on tariff news. Markets instead are focused on a recent slowdown in US data, and improvement in European data, and the potential for relative outperformance for the euro.
Across the region, the greenback fell, with the AUD/USD as one of the better performers, up 1.1%. The Aussie was helped by an in-line December-quarter GDP result with full-year Australian growth at 1.3% over 2024.
The kiwi was even stronger as the NZD/USD gained 1.2%.
The USD/SGD fell 0.6% while the USD/CNH lost 0.2%.
Euro surges ahead of ECB
The euro has surged higher this week, with the EUR/USD up an incredible 4.1% this week, and the euro at or near five-year highs versus the Australian and NZ dollar.
The European Central Bank meets tonight and looks likely to cut the deposit rate by 25 basis points to 2.50%.
Furthermore, we believe that data results in comparison to the ECB’s projections lend credence to a rate reduction.
The ECB is expected to change its rhetoric about restrictiveness; we believe it will imply that rates are less restrictive today than they were previously as a result of the recent rate decreases and state that it will evaluate the degree of restrictiveness.
MYR outperformance backed by fundamentals
Today, Malaysia’s policy meeting will be held. We anticipate the BNM will reiterate that the present monetary stance is still supportive of the economy by keeping its policy rate at 3% and adopting a similarly neutral attitude to the previous MPC sessions.
Despite noting ongoing global uncertainties, we believe BNM will remain optimistic about the growth forecast and reiterate that the resilience of the local economy is expected to be maintained this year.
Although inflation remained steady in January due to the impact of the moving Chinese New Year vacation, Q4 GDP growth was revised up to 5.0% year-over-year from the advance estimate of 4.8%.
The ringgit’s superior performance in Asia is supported by Malaysia’s better trade balance and perhaps larger tourist surplus.
The next key resistance is 200-day EMA of 4.4740, where MYR buyers may look to take advantage.
USD extends losses as tariff trend reverses
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.