The DXY climbed 0.7% to mid-98 levels given solid US data, with Q2 GDP revised significantly higher to 3.8% (3.3% in second estimate) on strong consumer spending. The BEA has also started to release investment data specifically for data centres, which had shown an incredibly high pace of growth since 2021, compared to all other fixed investment. The ongoing AI infrastructure boom is having a material impact on US macro data given its accelerated growth, despite its low starting base. Market valuations of AI related companies may thus have greater implications for the USD going forward.
Due to a stronger USD, USD/JPY has bounced towards 150. Japan’s Tokyo core-core CPI inflation was unexpectedly soft at 2.5% y/y in Sep, compared to 3.0% in Aug. While the softening is unexpected, it largely reflects a one-fall decline in prices due to the government expanding the number of children eligible for free daycare. Underlying inflation, after adjusting for this price shift, has not eased much, and thus it does not necessarily diminish the case for a near-term BOJ rate hike. Given a substantial rally in the USD due to the repricing of US rates, USD/JPY could see a consolidation today.
President Trump has signed an order advancing plans for American investors to buy TikTok’s US operations. Trump mentioned that this has already won approval from President Xi, and the acquisition likely signals meaningful progress in US-China trade negotiations. USD/CNH has rebounded above 7.14 amid the strong USD, but sentiment around US-China relations should support the RMB.
Quote of the Day
“There must be a beginning of any great matter, but the continuing unto the end until it be thoroughly finished yields the true glory.”
Sir Francis Drake
September 26 in history
English explorer Sir Francis Drake completed his circumnavigation of the world in 1580.
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