Loss of Interest Rate Support Weighed on Dollar

The establishment of SG4 Group Sdn Bhd (SG4 Group) by the four opposition-governed states, Kedah, Kelantan, Perlis and Terengganu, has good intention but it should study the world's rare earth element (REE) market prices.

Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi said this was because the current world REE prices have declined by 70%.

"This is due to the dumping of REE on the world market with stockpile production by certain countries.

"Although the price has dropped 70% from the original price, these four states need to have their own strategy, and it is subject to taxation and the ecosystem that has been determined by the federal government for that purpose," he said.

He told reporters after launching the International Legal Conference on Online Harms 2024 which was also attended by the Minister in the Prime Minister's Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said and the Spanish Ambassador to Malaysia Jose Luis Pardo.

Terengganu Menteri Besar Datuk Seri Dr Ahmad Samsuri Mokhtar was previously reported as saying that SG4 Group will focus on developing the REE processing industry in an effort to improve the economy of the four states under the Perikatan Nasional (PN) administration.

Regarding the Barisan Nasional (BN) candidate for the Mahkota state by-election, Ahmad Zahid, who is also the BN chairman, said it will be announced by Johor Menteri Besar Datuk Onn Hafiz.

"I will give authority to the Menteri Besar of Johor to announce the candidate for Mahkota candidate," he said.

The Election Commission (EC) set the voting day for the Mahkota by-election on September 28, while nomination and early voting were set for September 14 and 24 respectively.

The Mahkota state by-election is being held following the death of its incumbent, Datuk Sharifah Azizah Syed Zain, 64, on August 2.

Source: Theedgemarkets

Bank of Japan (BoJ) Board Member Hajime Takata is back on the wires early Europe on Thursday, noting that “if the economy, prices move in line with our forecast, we will adjust policy rate in several stages.”

Additional quotes

Don't have specific image in mind when I say we need to spend "sufficient time" to scrutinize economy, price developments.

Current market moves are second round of the volatility we saw in early August, which reflects concern over  the US economic outlook.

Our basic stance is to adjust degree of monetary support if economy, prices on track but that is not without some qualifications.

If markets are volatile, we must gauge the moves' impact on economy, prices in setting policy.

Based on our hearings, we expect there to be more price hikes in October though that was when the Yen was weakening.

We have seen some change in FX, market moves so must need to take fresh look at impact on economy, prices.

We won't directly respond to FX moves but we are aware they could affect economy, prices and risks.

Don't have preset idea on pace of rate hikes, or on whether we will hike rates several times.

We have no choice but to scrutinize at each policy meeting how market moves affect corporate balance sheets, earnings and risks to economy.

Source: FXSTREET

USD/CHF trades in negative territory for the third consecutive day near 0.8460 in Thursday’s early Asian session. 

Weaker US economic data and dovish Fed weigh on the US Dollar. 

Softer inflation in Switzerland supports the case for another rate cut by the SNB.

The USD/CHF pair extends its decline around 0.8460 during the early European session on Thursday. The growing speculation that the US Federal Reserve (Fed) will cut a larger interest rate in September exerts some selling pressure on the US Dollar (USD). Investors will focus on the release of the US ISM Services Purchasing Managers Index (PMI), the ADP report on private-sector employment and weekly Initial Jobless Claims on Thursday ahead of the highly anticipated August Nonfarm Payrolls (NFP). 

The recent weaker US economic data and the dovish stance of the Fed continue to undermine the Greenback broadly. The US Job Openings and Labor Turnover Survey showed that available positions declined to 7.67 million in July, compared with 7.91 million openings in June, the Labor Department revealed Wednesday. This report came in worse than the estimation of 8.1 million.

Meanwhile, Atlanta Fed President Raphael Bostic said on Wednesday that he is ready to start cutting interest rates even though inflation remains above the 2% target.  San Francisco Fed President Mary Daly said early Thursday that the central bank needs to cut interest rates to keep the labor market healthy, but she needs more data, including Friday's job market report and CPI, to determine the size of a rate cut. 

On the Swiss front, Swiss inflation slowed more than expected in August, prompting the expectation for another interest rate cut by the Swiss National Bank (SNB). Switzerland’s Consumer Price Index (CPI) rose 1.1% YoY in August, compared to the previous reading of 1.3%, below the market consensus of 1.2%. On a monthly basis, the CPI inflation remains unchanged in August from a decline of 0.2% in July, softer than the expectation of a 0.1% increase. 

Source: FXSTREET

KEY POINTS

EUR/GBP inches lower amid rising odds of the ECB reducing rates in September.

Eurozone Producer Price Index increased by 0.8% MoM in July, the largest increase since December 2022.

The British Pound strengthens as expectations grow that the BoE will remain more hawkish compared to the ECB.

EUR/GBP offers its recent gains from the previous session, trading around 0.8420 during Thursday’s Asian hours. Traders await Eurozone Retail Sales data scheduled to be released later in the day.

The downside of the EUR/GBP cross could be attributed to rising speculation that the European Central Bank (ECB) will cut interest rates in September. The ECB’s rate cut would mark the second interest rate cut by the ECB since it began shifting toward policy normalization in June.

In the Euro Area, the Producer Price Index (PPI) rose by 0.8% month-over-month in July, the largest increase since December 2022. This follows an upwardly revised 0.6% rise in June and significantly exceeds market forecasts of 0.3%.

However, the Eurozone Services PMI fell to 52.9 in August, from 53.3 in the previous month. Meanwhile, the Composite PMI decreased to 51.0, missing expectations and falling below the previous reading of 51.2.

The British Pound (GBP) advances further by rising expectations that the Bank of England's (BoE) rate-cutting cycle is more likely to be slower than the European Central Bank. The bets were lifted by Tuesday’s BRC Like-for-Like Retail Sales, which increased by 0.8% year-on-year in August, up from a 0.3% rise in July, marking the fastest growth in five months.

Meanwhile, there was positive sentiment from the UK macroeconomic front, as a Purchasing Managers Index (PMI) survey showed that business activity in August accelerated at its fastest pace since April.

On Wednesday, the S&P Global UK Composite PMI increased to 53.8 in August, up from 53.4 in the previous month and revised higher from the preliminary estimate of 53.4. The Services PMI rose to 53.7 in August, compared to 53.3 in the prior month. The data showed on Monday that the Manufacturing PMI held steady at 52.5 for August, consistent with preliminary estimates.

Source: FXSTREET

AUD/JPY drifts lower for the third successive day and drops to a multi-week low. 

Hawkish remarks by RBA’s Bullock boost the Aussie and lend support to the cross.

Bets for another BoJ rate hike in 2024 underpin the JPY and cap any further gains.

The AUD/JPY cross remains under some selling pressure for the third successive day on Thursday and drops to a three-and-half-week low during the Asian session on Thursday. Spot prices currently trade just below mid-96.00s and seem vulnerable to prolong this week's rejection slide from the key 200-day Simple Moving Average (SMA).

The Australian Dollar (AUD) did get a minor lift following Reserve Bank of Australia (RBA) Governor Michele Bullock's hawkish remarks, saying that the board remains vigilant to upside risks to inflation and does not expect to be in a position to cut rates in the near term. That said, unimpressive Australian Trade Balance data, showing that the surplus rose to A$6,009 million in July amid a 0.8% fall in imports and a 7% increase in exports, keeps a lid on any meaningful appreciating move. 

Apart from this, expectations that the Bank of Japan (BoJ) will hike rates again in 2024, bolstered by data showing that real wages in Japan rose for the second straight month in July, continue to underpin the Japanese Yen (JPY) and further contribute to capping the upside for the AUD/JPY cross. Moreover, BoJ Board Member Hajime Takata said that the central bank must adjust monetary conditions by another gear if it can confirm that firms will continue to increase capital expenditure, wages, and prices.

Meanwhile, the cautious market mood is seen as another factor benefitting the JPY's relative safe-haven status against its Australian counterpart. This, in turn, suggests that the path of least resistance for the AUD/JPY cross is to the downside and suggests that the the recent goodish recovery move from the vicinity of the 90.00 psychological mark, or over a one-year low touched in August has run out of steam already. 

Source: FXSTREET

KEY POINTS

USD/CAD inches higher as traders adopt caution ahead of US Initial Jobless Claims and ISM Services PMI.

The US Dollar received support from the improved US Treasury yields.

BoC reduced interest rates by 25 basis points to 4.25% at September’s meeting held on Wednesday.

USD/CAD retraces its recent losses, trading around 1.3510 during the Asian hours on Thursday. The US Dollar (USD) remains solid as traders adopt caution ahead of the release of US ISM Services PMI and Initial Jobless Claims scheduled to be released later in the North American session.

Attention will shift to Friday’s US Nonfarm Payrolls (NFP) to gain more cues on the potential size of an expected rate cut by the Federal Reserve (Fed) this month.

The US Dollar Index (DXY), which measures the value of the US Dollar against six other major currencies, trades around 101.30. The Greenback receives support from improving 2-year and 10-year yields on US Treasury bonds standing at 3.76% and 3.75, respectively, at the time of writing.

However, the US Dollar faced challenges after the release of July's US JOLTS Job Openings, which fell short of expectations and indicated a further slowdown in the labor market. The number of job openings dropped to 7.673 million in July, down from 7.910 million in June. This marked the lowest level since January 2021 and was below the market expectation of 8.10 million.

On Wednesday, the Bank of Canada (BoC) lowered its benchmark interest rate by 25 basis points (bps) to 4.25%, as expected, at September’s meeting held on Wednesday. BoC Governor Tiff Macklem commented, “If inflation continues to ease broadly in line with our July forecast, further cuts to our policy rate are likely.”

Governor Macklem also noted that a 25 basis points (bps) reduction seemed appropriate and observed that the divergence with the US Federal Reserve on rates has not significantly affected the exchange rate.

Source: FXSTREET