Australian Dollar (AUD) Rises after Dovish Fed
The Australian Dollar (AUD) was initially flat amid thin trading conditions during yesterday’s session.
However, the ‘Aussie’ gained over 1.5% in the early hours of this morning after Federal Reserve Chair Jerome Powell signaled that the interest rate cutting cycle would begin in 2024. The market is now pricing in 1.5 percentage points of cuts in 2024. Whether the US can avoid a recession only time will tell.
Looking ahead, Australia’s latest labour market data is due out this morning. An expected uptick in
unemployment could weigh on the AUD.
New Zealand Dollar (NZD) Slips amid Cooling Food Inflation
The New Zealand Dollar (NZD) slumped to multi-week lows yesterday as easing food inflation saw markets rein in bets on one final interest rate hike from the Reserve Bank of New Zealand (RBNZ).
The ‘Kiwi’ then recovered some ground, alongside the ‘Aussie’, as a risk-on market mood lifted NZD exchange rates.
We may see choppy movement in the New Zealand Dollar this morning as markets digest the latest GDP data for the third quarter.
Pound (GBP) Slides as UK Economy Contracts
The Pound (GBP) fell sharply at the start of yesterday’s European session after new data showed an unexpected contraction in the UK economy.
UK GDP shrank 0.3% in October, rather than stalling as expected, raising fresh concerns about the country’s economic outlook.
In the spotlight tonight is the Bank of England’s (BoE) final interest rate decision of 2023. If policymakers push back on rate cut expectations, Sterling could gain ground.
Euro (EUR) Softens as Eurozone Production Declines
The Euro (EUR) stumbled against its stronger peers yesterday, while avoiding losses elsewhere, following a larger-than-forecast decline in Eurozone industrial production.
Production in the bloc fell 0.7% in October, versus an anticipated drop of 0.3%, adding to growing evidence that the Eurozone economy is struggling.
Tonight, the European Central Bank (ECB) also announces its interest rate decision. Could a dovish tone in the accompanying press conference see EUR exchange rates slide?
US Dollar (USD) Retreats after Latest FOMC Meeting
The US Dollar (USD) slid after the latest Central Bank meeting, where interest rates were held steady, however they signalled that interest rates will be cut next year. The central bankers forecasted that interest rates will be cut 75bps in 2024, with a further 100bps of cuts in 2025. The banks forecasted inflation figures for 2024 were also revised significantly lower.
The dollar is now down approximately 1% against its other major traded currencies.
Canadian Dollar (CAD) Lifted by Rising Oil Prices
The Canadian Dollar (CAD) firmed over the course of yesterday’s trade as a modest recovery in oil prices lifted the commodity-sensitive ‘Loonie’.
Turning to today, a lack of Canadian economic data may leave CAD exchange rates to be driven by crude prices once again.
Data Releases
Dec 14th 07:45 NZD GDP Growth Rate (Q3) 0.2%
Dec 14th 10:30 AUD Unemployment Rate (Nov) 3.8%
Dec 14th 22:00 GBP BoE Interest Rate Decision 5.25%
Dec 14th 23:15 EUR ECB Interest Rate Decision 4.5%
Dec 14th 23:30 USD Retail Sales (Nov) -0.1%