FX Roundup: Euro up against dollar, AUD recovers from six-year low
The euro was up against the dollar in European trading on Friday, while the Australian dollar turned a corner after having dropped to a six-year low in the previous session.
At 1501 BST, the euro was fetching $1.111 up 1.63% or 0.0178 cents, stepping back into green territory and reversing some of the previous session’s losses. Kit Juckes, head of forex at Societe Generale, said current market trends are likely to persist beyond the first US Federal Reserve rate hike despite the already significant adjustment in emerging market and commodity currencies.
“The consequences of super-low US rates have become increasingly clear in the downturn in commodity prices, the effect that has on exporters' currencies and the risk that this in turn will have unexpected effects on those who have used low rates and high commodity prices to support debt accumulation.”
Wednesday’s US Federal Reserve meeting failed to put off investors from buying dollars taking it higher against all major currencies. Meanwhile, commodities-linked currencies had a calmer session as the Australian dollar swung back into green territory after falling to a six-year low over the previous session fetching $0.7329 up 0.49%.
Concurrently, the pound was fetching $1.5624 up 0.14%, with a data heavy week to follow as the Bank of England’s inflation report and interest rate decision is revealed. Elsewhere, the dollar was fetching JPY123.72 down 0.34%.
On the US data front, the cost of employment in the US came to a sharp slowdown in the second quarter, data released on Friday showed. The employment cost index rose 0.2% in the second quarter compared with a 0.7% pace in the previous three months, registering an all-time low since record began in 1982. The figure was comfortably below forecast for a 0.6% gain.
Meanwhile, the Chicago PMI index climbed to 54.7% in July from 49.4% in the previous month, reaching its highest level since January. Consumer sentiment fell to a final July reading of 93.1 from a final June level of 96.1, according to an University of Michigan report.
As a consequence, some in the City feel a September rate hike might well be on the table with investors positioning for the move.
“Ultimately, turning points in EUR/USD and USD/JPY are likely closer and could happen quickly once the market gets a better sense of the pace of the approaching Fed tightening cycle,” Juckes concluded.