Fed Opts for Aggressive 50bps Cut
AUD
The Aussie Dollar opens up mixed against all the major currencies despite the RBA’s hawkish stance and the US Fed's 50bps interest rate cut earlier this morning. Asian equities ended the day strong across the board with NIKKEI +0.5%, SHENZHEN +0.4%, HANG SENG +1.4% and the ASX finishing the day flat. Commodities were mainly down with Crude Oil -1.6%, Gold -0.8%, Silver -1.4% and Iron Ore +0.4%. No major data out of either Australia or China yesterday, however, today we have the Australian Unemployment Rate set for release in the late morning, expected to remain unchanged at 4.2%. We'll also see Employment Change, expected at +26.4k, highlighting the change in the number of employed people in the month of August. The main event to keep an eye on is the RBA’s Interest rate decision and commentary next Tuesday which is expected to remain unchanged at 4.35%. It is going to be a hard juggling act for the RBA as inflation remains relatively sticky while Australia’s economic growth remains sluggish.
USD
The AUDUSD pair opens flat at 0.6758 despite the Fed cutting interest rates by 50 basis points from 5.5% to 5% earlier this morning. Overnight we saw some market volatility between the pair, reaching 0.6820 before retracing right back. Despite the large cut from the Fed, Jerome Powell stated that the cut was not a signal of a new pace of reductions, highlighting their patience and that their decisions will be data dependent. The FOMC Statement was also altered to place more emphasis on the labour market and the goal of maximum employment. In the Press Conference, Chair Powell also highlighted the upcoming employment reports as being of particular importance. The dot plot suggests further easing ahead, now projecting another 50bps of cuts by year-end (The Fed will meet 2 more times in 2024). US Equities finished the day down with DOW JONES -0.2%, S&P 500 -0.2%, NASDAQ -0.3%. Today the US has Initial Jobless Claims data expected to remain unchanged at 230k and Philadelphia Fed Manufacturing Index expected to come in at -1.
EUR
AUDEUR opens flat at 0.6080 this morning with Eurozone Final CPI y/y printing on-expectations at 2.2%, down from 2.6%. European equities were both slightly down with DAX -0.1% and CAC -0.6%. Looking forward, it is a quiet next couple of days in the Euro area with only low tier data events.
GBP
AUDGBP opens slightly lower this morning, testing the 0.51 support before rebounding to 0.5117. Yesterday we had GB Inflation Rate y/y come out on-expectations at 2.2% and Core Inflation coming in slightly higher at 3.6% versus expectations of 3.5%. No big shock here however core inflation coming in slightly above expectations and jumping 0.3% from 3.3% to 3.6% may strengthen the case for no more cuts in the near term. UK equities ended the day down with the FTSE closing the day at -0.7%. Looking forward, today the Bank of England has their interest rate decision which is expected to remain unchanged at 5% after cutting it by 25 basis points in their August meeting. Tomorrow, the UK also has Retail Sales MoM expected to come in at 0.4%.
NZD
AUDNZD opens slightly down this morning at 1.0882 despite NZ GDP figures reflecting further shrinkage in the Kiwi economy. The q/q and y/y figures came in at -0.2% and -0.5% respectively. Despite unexpectedly cutting interest rates in August, these weak GDP figures may gain further support of another rate cut at the RBNZ October meeting to stimulate the economy and avoid a recession.