Home Daily Commentaries USD bounces back amid US-China tensions

USD bounces back amid US-China tensions

Tuesday 2 August, 2022

Daily Currency Update

The US dollar bounced back on Tuesday against a basket of currencies after underperforming through trade on Monday following a weaker than anticipated ISM Manufacturing Index print. Yesterday's data showed that activity has fallen to its lowest level in 2 years, while key indicators within the report suggest economic recession is imminent. Stocks and bond yields moved lower today as the market's mood turned dismal amid growing tensions between the US and China. US House of Representatives Speaker Nancy Pelosi is expected to arrive in Taiwan late Tuesday local time. Her visit has drawn warnings from China, which has claimed Taiwan as its territory despite the country being a self-governing democracy. The US Dollar Index was up 0.40% at 105.87 at the time of writing.  

Key Movers

The Reserve Bank of Australia raised its cash rate 50 basis points to 1.85% on Tuesday and flagged yet more hikes ahead, continuing the aggressive tightening that many central banks have adopted to combat inflation. RBA Governor Philip Lowe comments following the release also stated that the RBA were committed to doing what is necessary to ensure that inflation in Australia returns to target over time after the most recent data from the Australian Bureau of Statistics showed CPI inflation rose 6.1% in the year to June. RBA’s central forecast is for Consumer Price Index inflation to be around 7.75% over 2022, which is way above the 2 to 3% target. AUDUSD has dropped back below 0.7000, as the Australian dollar suffered on the back of the US dollar being bought as a safe haven with the risk-off sentiment in the market on anticipation of US Representatives Speaker Nancy Pelosi visiting Taiwan. The USD normally is bought alongside other safe havens products such as gold, JPY and CHF, when the risk appetite of investors exits the market.  

Expected Ranges

  • EUR/USD: 1.0188 - 1.0291 ▼
  • GBP/USD: 1.2187 - 1.2282 ▼
  • AUD/USD: 0.6917 - 0.7042 ▼
  • USD/CAD: 1.2814 - 1.2876 ▲