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Market Update 08/10/2024

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 showed mixed performance, with US stocks declining due to expectations of slower rate cuts from the FOMC and rising bond yields. The S&P 500 fell 0.6%, while the Euro Stoxx 50 and FTSE 100 both gained 0.3%. Meanwhile, the yield on the US 10-year Treasury increased by 4.9 bps to 4.016%, highest level since August. Brent crude jumped to $80 a barrel, with mounting tensions in the Middle East raising speculation that Israel may attack Iran’s oil infrastructure.
 
Due to stronger job growth in September, expectation of a continued slowdown in inflation has fuelled speculation that policymaker will choose a smaller rate cut next month. Money markets have largely ruled out another 50bps cut this year and the likelihood of a 25bps reduction in November is now pricing around 80% chance.
 
USD is stronger against Australasian currencies but have lost ground against CHF & JPY.
 
NZDUSD dropped by 0.7% during the offshore session, reaching around 0.6120. This marks the fifth straight day of losses, the longest streak since July, driven by rising US yields, reduced Fed rate cut expectations, higher oil prices, and ongoing Middle East tensions supporting the USD. NZDUSD has support at 0.6100-0.6110, with a further break below 0.6085 could signal a more bearish outlook. Key events ahead include the RBNZ decision on Wednesday and US CPI data on Thursday. A 50bps rate cut by the RBNZ would weaken the NZD, and if US CPI exceeds expectations, any Fed rate cuts could become uncertain, increasing downside risks for the NZD.
 
NZDAUD remains steady at 0.9065. A batch of Australian data is due today, including the RBA minutes, and their historically more balanced approach could push NZDAUD lower, which has been gradually declining. Although the RBA hasn’t raised rates as aggressively as the RBNZ, market expectations suggest that RBNZ’s OCR will fall below the RBA cash rate by February.
 
NZDEUR dropped below 0.5600, reaching 0.5580. In Europe, German factory orders for August declined by 5.8% m/m, the biggest drop since January. ECB’s Villeroy mentioned that a rate cut in October is quite possible, noting the need to monitor inflation closely to avoid falling short. Eurozone retail sales increased by 0.2% m/m in August.
 
No significant domestic economic data is scheduled for today. However, in Australia, several key releases are expected, including consumer sentiment data at 12:30pm, followed by the monetary policy minutes and business confidence data at 1:30pm. Additionally, Japan’s current account data at 12:50pm is also worth monitoring.

 

 Here are the latest mid-market rates:

Currency Pair Mid-market rate
NZD/USD 0.6123
NZD/AUD 0.9065
NZD/JPY 90.76
NZD/CNY 4.3296
NZD/EUR 0.5581
NZD/GBP 0.4681
NZD/HKD 4.7556
NZD/SGD 0.7987

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