USD Surges as Fed Dials Back 2025 Projections
AUD
The Aussie dollar continues its downwards trend, opening lower against majors due to weakened risk sentiment caused by persistent concerns over the slowing economy, declining consumer confidence and markets advancing expectations for the RBA's first rate cut amid growing signs of economic weakness. Asian equities closed mixed with the Nikkei -0.7%, Hang Seng +0.8%, Shanghai Comp +0.6%, domestically the ASX closed in the red -0.1%. Commodities took another hit with Gold and Silver down -1.2%, and -1.7% respectively, while Iron Ore -0.3%, and Copper -1%. No major news domestically for the rest of the week, with only MI Inflation Expectations set to be released today at 11am, however, we will see China's 1-y and 5-y Loan Prime Rate decision tomorrow at 12:15pm which is forecasted to remain the same at 3.10%, and 3.60% respectively.
USD
The AUDUSD coupling opens lower this morning, plummeting to its lowest level in over two years at 0.6216, following the US Federal Reserve's "hawkish cut" which strengthened the US Dollar. While the Fed delivered a widely expected 25bps rate reduction, the central bank's dot plot signaled only two cuts in 2025 totalling 50bps, a tighter monetary policy stance compared to earlier projections of 100bps. The central bank also stated the Unemployment Rate remains low, while the rate of inflation remains 'somewhat elevated'. Further pressure came from weak Chinese economic data and the risk of renewed US tariffs under a potential Trump administration, given Australia’s heavy trade ties with China. Wall St. took a hit, falling pretty hard after the Feds commentary with the Dow Jones -1.2%, S&P 500 -1.0%, and the NASDAQ -1.9%. There will be some more major data overnight out of the US with Final GDP q/q, Unemployment Claims, being the main events alongside with Final GDP Price Index q/q, Philly Fed Manufacturing Index, and Existing Home Sales.
EUR
The AUDEUR coupling opens lower this morning after a late rally at 10pm when the Eurozone’s Final CPI y/y missed forecasts, coming through at 2.2% from the forecast 2.3%, however the Aussie was unable to maintain the gains, falling early this morning to 0.6007. Eurozone equities closed mostly flat with the DAX unchanged and the CAC +0.3%. No major data out of the Eurozone today or the rest of the week with only German GfK Consumer Climate, and Current Account set for release later this evening.
GBP
The AUDGBP opens at fresh 4-year lows of 0.4940 despite UK annual inflation printing on-expectations at 2.6%. UK equities closed flat. Looking at today, the Bank of England's key interest rate decision will be announced at 11pm with expectations that the BoE’s Monetary Policy Committee will keep the policy rate on hold at 4.75% (after cutting 25 bps in November). Recent commentary from MPC members suggests they are comfortable with a gradual cut-hold pace of easing, especially given wage growth approximately double the inflation rate at the moment
NZD
The AUDNZD coupling opens higher this morning at 1.1064 despite our Kiwi neighbours' GDP q/q printing much lower than forecasts earlier this morning at -1.0%, from the forecast -0.2%, sending NZ into a technical recession. We will also see the ANZ Business Confidence later at 11am with no set forecasts.