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DXY appreciated 0.8% to 102.84, its highest weekly close since 30 June. Unlike the first week of July, the USD was resilient to a larger-than-expected drop in US nonfarm payrolls and a smaller-than-expected rise in CPI inflation (the first YoY increase in 13 months). On 16 August, the FOMC minutes could lift the greenback if Fed officials see another hike in one of the remaining three meetings of the year. Although interest rate futures believed the Fed delivered its final hike in July, the US Treasury 2Y yield firmed to 4.89%, its highest level since 1 August. The Atlanta Fed GDPNow model sees US GDP growth rebounding to 4.1% QoQ saar in 3Q23 after rising to 2.4% in 2Q23 from 2% in 1Q23. At the last FOMC meeting, Fed staff stopped forecasting a US recession.
EUR/USD depreciated 0.5% to 1.0949, its first weekly close below 1.10 since 7 July. EUR will eye its mid-year low around 1.0835 if its breaks below 1.0930, its 100-day-moving average. Unlike the Fed, the European Central Bank warned that the outlook for the Eurozone economy has deteriorated. Markets do not rule out ECB pausing hikes and downgrading its economic forecast at the governing council on 14 September. The prime ministers of Italy and Portugal, countries facing recession risks, have criticized the ECB for repeated rate hikes. The ECB’s bank lending survey noted the substantial falls in credit demand for companies and households from banks further tightening lending criteria on higher borrowing costs amid stagnant growth.
GBP/USD depreciated a fourth week by 0.4% to 1.2696, its weakest weekly close since 9 June. According to the Commodity Futures Trading Commission (CFTC), net long non-commercial GBP positions peaked at 66k contracts in the 18 July week, around which UK’s CPI inflation fell to 0.1% MoM in June from 0.7% in May. Over the next three weeks, speculators trimmed their net long positions to 46k. Pay attention to the CPI data on 16 August. Bloomberg consensus sees CPI inflation falling by 0.5% MoM in July, its first decline since January. In YoY terms, headline inflation is expected to drop to 6.8% in July from 7.9% and core inflation to 6.8% from 6.9%. On the same day, consensus sees RPI inflation falling to 9% YoY in July, its first single-digit print since March 2022. Although UK GDP growth was 0.2% QoQ sa in 2Q23 vs 0.1% the previous quarter, the National Institute of Economic and Social Research (NIESR) forecasted an economic recession in 2024 with GDP growth turning negative as early as end-2023.
NZD/USD depreciated 1.8% to 0.5984, its worst weekly close below 0.60 since early November. On 16 August, the Reserve Bank of New Zealand should keep its official cash rate unchanged at 5.50% for a third meeting. The central bank believes keeping interest rates restrictive at current levels will bring inflation back to the 1-3% target. RBNZ sees the 525 bps of hikes since October 2021 passing through to households moving off fixed mortgage rates. The NZ economy entered a technical recession in 1Q23, with the seasonally adjusted unemployment rate rising to 3.6% in 2Q23 from 3.4% in the previous quarter. Due to the cost-of-living crisis, the ruling Labour Party is trailing behind the opposition National Party ahead of the general elections scheduled on 14 October.
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France became the first country to introduce motor vehicle registration in 1893.
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