Europe Summary and Highlights 14 August
USD weaker versus riskier currencies in Europe.
European morning session
The USD was weaker against the riskier currencies through the European morning. EUR/USD broke above 1.10 and hit a high of 1.1028 after opening at 1.0990. The SEK was the strongest currency on the session, with EUR/SEK dropping 5 figures to 11.47, helped by stronger than expected Swedish July CPI data, which showed the targeted CPIF measure rising to 1.7% y/y. GBP underperformed, with EUR/GBP gaining 30 pips to 0.8580. The initial rise was due to weaker than expected UK July CPI data for July, which showed a smaller than expected rise in headline inflation to 2.2% y/y from 2.0% in June. GBP/USD was slightly lower on the session as a result. AUD and CAD were both around 0.1% firmer, while USD/JPY was unchanged and USD/CHF kept pace with EUR/USD.
Asia Session
The RBNZ cut its cash rate by 25bp to 5.25% in the August meeting with significant revision in their forecast and expects inflation to return to three percent in September 2024. The RBNZ reinforce their view that inflation will continue to tread lower after Q2 CPI came in lower than forecast at 3.3%, shaking off the hot labor report in Q2. They cited "Surveyed inflation expectations, firms’ pricing behaviour, headline inflation, and a variety of core inflation measures" are all aligning with their forecast, which was revised significantly. The OCR forecast has been revised lower to 4.92% in December 2024 from 5.65% and at 3.85% in December 2025 from 5.14%. The OCR path shows continuous easing until year end 2026 at 3% terminal rate. Q2 2024 CPI has been revised lower to sub-two percent from three percent. NZD/USD sunk 1.16% on the decision to 0.6007 as market is tilted towards a hold in the July meeting with Q2 CPI remains above 3%, AUD/USD is also 0.15% lower at 0.6624 as regional equities are broadly soft and U.S. three major equity indexes barely in the green while USD/CAD is 0.09% higher.
Japanese Prime Minister Kishida announced he will not seek re-election and effectively stepping down in September.In his press conference, he says Japan must promote wage, investment growth for full exit deflation-prone economy. The political surprise has sent USD/JPY lower to 146.07 before rebounding to 146.93 and turned 0.08% higher for the session as JGB yields slides. Else, EUR/USD is unchanged and GBP/USD is down 0.02%.