Fed Stands Pat as Trump Tariffs Loom
AUD
The AUD falls across the board following after yesterday's softer inflation report upped market expectations of an interest rate cut from the Reserve Bank of Australia in February. Asian equities were mixed into the close, with the ASX closing down 0.6%, and the SHANGHAI COMP closing down 0.1%. Commodities finished the day mostly up, with Crude Oil closing down 1.1%, Nat Gas steaming ahead 6.1%, Gold was up 0.1%, Silver up 0.4%, Iron Ore was flat and Copper was up 1%. Yesterday, Australia's quarterly inflation report came in lower, with Trimmed Mean CPI q/q dropping from 0.8% to 0.5%, expected at 0.6%. The headline annual figure was 2.4%, the lowest since early 2021. Markets are now pricing in 90% odds of an RBA interest rate cut in February, up from 69% odds two weeks ago, although there is a chance the RBA will hold rates again given Australia's still-tight employment market. Today will see Import Prices q/q to be released, looking to increase from -1.4% to 1,5%.
USD
The AUDUSD sees a further slumping yesterday, falling to a weekly low, opening this morning at 0.6226. Wall Street took a hit yesterday, with the DOW JONES closing down 0.1%, S&P 500 down 0.6% and the NASDAQ was 0.4%. The Federal Funds Rate came out unchanged at 4.50%, as largely expected, with the following commentary noting the unemployment rate was stabilized at a low level, and economic growth slowly ticked up. With Trump’s tariffs looming, the Fed has more reason to hold rates and asses what level of inflationary pressures this causes with higher costs of imported goods. Tonight, we will see Advance GDP q/q, looking to slow to 2.7% from 3.1%, and Unemployment Claims remaining largely unchanged at 223k
EUR
The AUDEUR opens the day lower, with the pair having a dip early yesterday, with the pair keeping sideways after this, opening this morning at a rate of 0.5979. European equities finished the day mixed, with the CAC closing down 0.3% and the DAX up 1%. To the news, Spanish Flash GDP q/q remained at 0.8%, despite expectations of a drop to 0.6%, and Private Loans y/y crept up, growing to 1.1% from 0.9%. Tonight, will see a slew of data being released, with several Prelim GDP q/q being released, leading up to the Main Refinancing Rate tonight. Forecasts are of a 25bps cut, from 3.15% to 2.90%, with many economists believe this cut to be nearly certain to boost economic output. If the ECB decides to hold the rate, this will likely see the Euro strengthen.
GBP
The AUDGBP opens the day lower, with the pair moving sideways until the early morning where the pair slid to this morning’s open of 0.5002. British equities finished the marginally in the green, with the FTSE closing up 0.3%. Last night saw Bank of England Governor Bailey testifying before the Treasury Committee, saying the BOE is supportive of growth policies from the government to boost the economic growth within the UK, which has been struggling. Looking forward, it is quiet for the remainder of the week, with Net Lending to Individuals m/m looking to increase .2b to 3.6b tonight.
NZD
The AUDNZD opens the day lower, with the pair seeing most of it’s losses earlier today, opening this morning at a rate of 1.1007. This morning saw the release of the trade balance, coming in at +219m, with expectations at -1363m from a previous -437m.