Australian Dollar (AUD) drifts as markets await RBA insights
The Australian dollar eased slightly yesterday in a session lacking any meaningful data releases locally.
The market is eagerly awaiting any fresh insights into the RBA’s future monetary policy direction, particularly in light of recent global economic uncertainties and Australia’s inflation trajectory.
Looking ahead, today’s speech by RBA’s Chief Economist Hunter, could provide key guidance on the RBA’s stance, potentially influencing AUD’s direction in the coming sessions. Attention will also turn to any further stimulus announcements out of China, and key inflation figures out of the US.
NZ Dollar (NZD) slips following RBNZ rate cut
The New Zealand dollar (NZD) faced downward pressure yesterday after the Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate by 50bps to 4.75%. This cut was widely expected by analysts and markets alike. During the RBNZ meeting, both a 25bp and 50bp cut were discussed, but the larger cut was deemed more aligned with New Zealand’s monetary policy goals.
The RBNZ noted that inflation is projected to return to the 1–3% target range by Q3, stabilising around 2% in the medium term. A cautious easing bias was indicated, driven by soft demand, growing slack in the labour market, and low inflation.
Looking ahead, NZD may take movement from risk-tones in the overall market, and key data releases out of the US.
US dollar (USD) strengthened by FOMC minutes
The US dollar (USD) initially traded with modest gains on Wednesday. While the currency benefitted from risk-off flows, USD investors were reluctant to make any aggressive bets as they awaited the publication of the minutes from the Federal Reserve’s September policy meeting.
The minutes then propelled USD exchange rates higher during the second half of the US trading session after they signalled most Fed policymakers don’t see September’s bumper rate cut being repeated in November.
The publication of the latest US consumer price index will be in the spotlight today. September’s CPI figures are expected to report US inflation continues to cool. Could this revive bets for a 50bps rate cut next month and sink the US dollar?
Pound (GBP) supported by budget hopes
The pound (GBP) trended broadly higher through yesterday’s session, supported by reports suggesting that UK Chancellor Rachel Reeves has decided to change the government’s debt rules.
This will allow the government to borrow more, with GBP investors hoping this will provide the Chancellor with more fiscal headroom to increase infrastructure investment.
Looking ahead, with UK data in short supply, the pound may struggle to find direction today.
Euro (EUR) undermined by ECB remarks
The euro (EUR) faced headwinds on Wednesday, following dovish remarks from European Central Bank (ECB) policymakers.
The ECB’s Martins Kazaks suggested further interest rate cuts ‘are necessary’ due to the weakness of the Eurozone economy, while his colleague François Villeroy de Galhau stated another rate cut is ‘very likely’.
Today will see the publication of the minutes from the ECB’s September policy meeting. If these highlight that policymakers are open to another cut this month, the euro is likely to extend its losses.
Canadian dollar (CAD) dented by sliding oil prices
The Canadian dollar (CAD) was subdued on Thursday as a softening of oil prices weakened the appeal of the commodity-linked currency.
In the absence of any notable CAD data today, the ‘loonie’ may continue to trade in tandem with oil prices.
Data Releases
21:30 EUR ECB Minutes
22:30 USD Inflation Rate (Sep)