Australian Dollar Extends Losses as Wage Growth Falls

Australia’s wage growth ticked lower to 3.6% y/y in the second quarter, compared to 3.7% in Q1. Wages rose 0.8% q/q for a third straight quarter in Q2. The takeaway is that although wage growth remains high, we’re not seeing a rise. That is an encouraging sign for the Reserve Bank of Australia, as higher wages raise the possibility of a wage-price spiral, which would hurt the RBA’s efforts to reduce inflation.

Dollar Trying to Break Bear Trend

The DXY has gained more than 3.8% over the past month, fully retracing its losses from five trading sessions in early July after the NFP. This retracement carries extra weight; a sharp upward or downward from current levels would be an essential trend indicator.

US: Retail Sales Rise More than Expected in July  

U.S. consumers kicked off the third quarter on a strong note with retail sales coming in well above expectations. Though still early yet, sales are currently tracking 4.7% annualized in 2023 Q3 relative to the revised 0.6% posted for Q2. Despite the strong start, looking ahead, we expect consumer spending to slow over the remainder of the year as past rate hikes continue to filter through the economy.

Canada: Inflation Back Above 3% in July, Thanks to Higher Energy Prices 

Consumer price inflation ticked up to 3.3% on a year-on-year (y/y) basis in July, up from 2.8% in June, largely thanks to base-year effects on gasoline prices.

Yuan Nears Multi-Year Lows on the Weaker Economy

Shortly after the statistics release, the People’s Bank of China cut its medium-term lending rate by 0.15 percentage points to 2.5%. The weak economic data and the rate cut put pressure on the Yuan. The USD/CNH exchange rate was above 7.32 on Tuesday and was only higher for a few days in October-November last year. Consistently higher, it was traded until 2008. This is an explainable market reaction to the dramatic shift in expectations and the divergence in US and Chinese monetary policy.

Canadian Dollar Steady Despite Rise in Inflation

Canada released the July inflation report earlier today. CPI rose 3.3% y/y, up from 2.8% in June and above the consensus estimate of 3.0%. On a monthly basis, CPI was up 0.6% in June, compared to 0.1% in May and higher than the estimate of 0.3%.

Stocks Drop on China Jitters and as Global Bond Selloff Continues

US stocks remained heavy after a robust retail sales report sent yields higher and raised the odds that the Fed might not be done raising rates. A healthy consumer was supposed to drive soft landing calls, but too much consumer resilience will drive the Fed to keep rates higher for longer. This US retail sales report showed spending is picking up, especially given the upward revisions for June's report. ​

NZ First Impression RBNZ August 2023 Policy Decision

The RBNZ left the OCR unchanged as widely expected at 5.5%. The overall tone of the statement is broadly unchanged although a touch more hawkish for the immediate period given the OCR track has been revised slightly higher (the updated OCR track now shows around a 40% chance of one further rate hike to 5.75% in the first half of 2024. In contrast, the RBNZ’s previous forecasts did rise above 5.50%).

The Crypto Market Starts Moving Down

Bitcoin approached $29.0K after a prolonged consolidation of around $29.4K. Technically, the sell-off in Bitcoin could gain momentum on a break below $28.9K. In this case, the price could quickly fall to $28.0K or even $27.2K.

BoE Unlikely to Stop Hiking as UK Inflation Remains High

UK CPI fell 0.4% in July (-0.5% expected), the first decline since January. The year-over-year price growth rate fell to 6.8%, the lowest since February 2022. The Retail Price Index last month was 9.0% higher than a year before, slowing to single digits for the first time since March 2022.