USD quiet in the G10, advancing against EM
With a light US data calendar, G10 FX markets remain relatively quiet, but the USD continues to show resilience against EM currencies. Rates markets remain key for a stronger USD tone against EM currencies such as the INR and ZAR. In G10 space, AUD and NZD (the currencies with the highest beta to emerging markets) have seen the most selling pressure, while higher US rates have also supported USDJPY. There are no major data releases due in the US today, and the next significant event remains the minutes to the FOMC’s July 31 meeting due on Wednesday. To the extent that the minutes shed more light on the Fed’s QE tapering plans, they could offer a boost to the USD. However, this could be offset by the discussion of forward guidance on policy tightening, including the potential lowering of the unemployment rate threshold. The bottom line is that while the market remains sensitive to the mixed signals from the Fed, an acceleration in US growth in Q3 and Q4 will be needed to trigger renewed USD strength.
Read the full report: FX Daily
BNP Paribas