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Market Update 01/11/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX. If you have any questions or would like anything further explained, please don’t hesitate to reach out to your account manager or email info@cafx.com

Equity markets sold-off and bond yields increased as investors grew more cautious with the upcoming US election. The S&P 500 dropped 1.6%, the Dow fell 0.6% and the Nasdaq declined by 2.6% amid disappointing earnings results. In Europe, the Euro Stoxx 50 decreased by 1.2% and the FTSE 100 was down 0.6%. Meanwhile, the yield on the US 10-year Treasury dipped by 3.2 bps to 4.27%.

The September PCE deflator increased by 0.2% m/m and 2.1% y/y, while core PCE rose by 0.3% m/m and 2.7% y/y. The headline PCE deflator is now back at the Fed’s target and is lower than the FOMC’s year-end projection of 2.3% y/y. The 3 & 6 month annualized rates are at 1.8% and 1.7%, indicating that disinflation is currently progressing faster than the FOMC expected. Overall, the data shows a well-established disinflation trend in the US, supporting a potential 25bps rate cut from the Fed next week.

NZDUSD remains weak, currently around 0.5976 after hitting a new 11-week low of 0.5940. Market volatility has increased with the upcoming US presidential election and Fed announcement, along with a general USD rebound following the release of US jobless claims data. The strong downward trend throughout October points to continued pressure on the NZD amid elevated uncertainty heading into next week.

NZDAUD is currently at 0.9082, staying well below the 100-day moving average of 0.9120. It briefly tested this level the day before, but as with other attempts in October to break above 0.9100, the momentum quickly faded.

NZDJPY fell nearly 1% to 90.70 but has remained steady within its recent five-week range of 90-92. Meanwhile, USDJPY has dropped 0.8% to 152.20, with the yen emerging as the strongest major currency. The Bank of Japan held its policy steady as expected, with minor adjustments to inflation forecasts, showing both headline and core CPI inflation approaching 2% over the forecast period. On policy direction, the BoJ noted that, with real interest rates still quite low, it plans to continue raising rates and adjusting monetary support. Governor Ueda’s remarks were seen as hawkish, keeping the possibility of a December rate hike open.

NZDEUR struggling at a 10-week low of 0.5493, while NZDGBP has risen to 0.4635, supported by reactions to the UK Budget. The market has responded negatively to the UK’s increased taxes, spending, and borrowing plans, with the UK 10-year gilt yield rising an additional 10 basis points to 4.45%, totalling a 25bp increase. The Office for Budget Responsibility described this budget as “one of the largest fiscal loosening’s of any fiscal event in recent decades.” GBPUSD has been the weakest major currency, down 0.9% since yesterday to 1.2860.

Looking ahead, the US employment report will be closely watched.

Here are the latest mid-market rates:

Currency Pair Mid-market rate
NZD/USD 0.5978
NZD/AUD 0.9082
NZD/JPY 90.91
NZD/CNY 4.2572
NZD/EUR 0.5493
NZD/GBP 0.4634
NZD/HKD 4.6464
NZD/SGD 0.7892

 

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