Market Update 04/11/2024

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 rallied despite weaker then expected US labour market data. The S&P 500 ended 0.4% higher, the Dow gained 0.7%, the Euro Stoxx 50 increased by 1.0% and the FTSE 100 climbed 0.8%. Meanwhile, the yield on the US 10-year increased by 9.9 bps to 4.38%.

US nonfarm payrolls rose by just 12k in October, falling short of the expected 101,000 increase, with recent weather events partially affecting results. Additionally, the prior two months saw a combined downward revision of 112k jobs. The Bureau of Labor Statistics noted that while two hurricanes impacted hiring in some sectors, the precise effect on employment, hours, or wages couldn’t be determined.

The unemployment rate stayed at 4.1%, and hourly earnings remained stable. This is the last major data release before the FOMC meeting, and while the Federal Reserve may see some of the weak payroll data as due to one-off factors, the figures align with expectations for another rate cut this week. Markets remain mostly unchanged, with a 25 bps cut largely priced in for the meeting and a total of 46 bps by year-end.

In manufacturing, the US ISM index remained in contraction for the seventh consecutive month, slipping to 46.5, its lowest level since July 2023 as lower production dragged down the index, indicating a decline in manufacturing activity. The ISM highlighted that election uncertainty is dampening inventory and capital investments, with the prices paid index climbing to a five-month high.

In terms of US election timeframes, we’ll start to see poll closures in Indiana and Kentucky from 12:00pm NZT on Wednesday 06^th November, with key swing states closing between 1:00 pm and 4:00 pm NZT (Pennsylvania, the largest swing state by electoral votes, closes at 2:00 pm). Some states may have results called almost immediately through exit polling by groups like the Associated Press, while others might take longer to count.

The US dollar was generally stronger against G10 currencies.

NZDUSD briefly surged toward 0.6000 before pulling back to 0.5960 to finish the offshore session slightly weaker. Volatility remains high, with the US election (Wednesday NZT) and the Fed’s decision this Friday at 8:00 am NZT keeping market themes largely focused on the US. However, upcoming Q3 New Zealand labour market data on Wednesday could shift market expectations for the RBNZ, which would likely impact the NZD as well.

NZDAUD is steady around the 0.9090. With the RBNZ expected to cut interest rates again on 27^th November, and Australia likely holding off on cuts until April or May 2025, the NZDAUD rate might anticipated to fall below 0.9000 in the coming months. The widening interest rate gap favours the AUD, which is likely to perform better than the NZD against the USD, supporting a lower NZDAUD cross-rate.

NZDGBP traded down towards 0.4610.

There’s no significant economic data scheduled locally or internationally today. However, this week is packed with key events, including New Zealand’s Q3 labour market data on Wednesday at 10:45am NZT, central bank meetings in Australia (Tuesday at 4:30 pm NZT), the US (Friday at 8:00 am NZT), and the UK (Friday at 1:00 am NZT), as well as the US election, all of which could have market impacts.

Here are the latest mid-market rates: