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
Following the strong market response to Trump’s victory, there has been some partial pullback in currency & bond markets, though this hasn’t been reflected in U.S. equities. The S&P 500 gained 0.7%, and the Euro Stoxx 50 closed up 1.1%, driven by rising expectations for an early 2025 election in Germany. Meanwhile, the FTSE 100 dipped by 0.3%. The yield on the U.S. 10-year note dropped 11 bps to 4.33%.
The US Fed this morning cuts rates by 25bps as expected and the accompanying statement with minor adjustments had minimal effect on short-term price movements.
As expected, the first question in the FOMC press conference Q&A addressed the election results and the potential impact of a second Trump presidency on Fed policy. Powell clarified there would be no immediate impact, but he outlined a hypothetical scenario where future tax law changes could prompt the Fed to reassess their economic impact and potentially adjust its policy direction accordingly.
In summary, the FOMC meeting offered no surprises or shifts in the Fed’s policy outlook. The current stance aligns with the median projections from September, where a further 25bps cut in December remains likely. Powell indicated the Fed is still moving towards a more neutral policy setting, with an additional 100bps of cuts anticipated in 2025, reflecting the recent increase in economic activity.
The USD is generally weaker, with the DXY index down 0.7% following its substantial 1.6% gain after the recent victory.
■ AUD/USD continued its upward trajectory overnight, surpassing its pre-US election vote counting levels. It’s currently trading around 0.6680. AUD also strengthened against other major currencies, supported by improved risk sentiment and expectations of a substantial fiscal stimulus package from Chinese authorities, possibly as soon as tonight, to counteract potential US tariff impacts. Chinese shares surged 3% yesterday. However, AUD/USD may face downward pressure early next week if stimulus expectations aren’t met.
■ USD generally weakened overnight, alongside declining US Treasury yields, trading near 104.4pts. Equities performed well, with the S&P500 up 0.8%. Weekly initial jobless claims remained low at 221,000, but continuing claims rose to a cycle high of 1,892,000. The FOMC cut rates by 25bp as expected to 4.50-4.75%. Chair Powell didn’t comment on Trump’s election impact on monetary policy. We’ve adjusted our FOMC forecasts, now expecting the Fed Funds rate to be cut to 3.75% instead of 3.25%, accounting for potential tax cuts and tariffs under Trump.
■ AUD/GBP rose slightly, trading near 0.5140. GBP/USD increased up to 0.9% following the Bank of England’s (BoE) hawkish rate cut announcement. The BoE noted the expansionary budget would boost inflation and GDP. We maintain our expectation of unchanged BoE rates in December, with markets now pricing a 25% chance of a cut, down from one-third previously.
■
AUD/NZD edged higher to around 1.1080, up 0.7% this week. Tonight’s potential Chinese fiscal stimulus announcement could significantly impact both AUD and NZD, with AUD/NZD sensitive to the stimulus composition.
■ AUD/CAD rose about 40pips to 0.9240. Canada’s October labour market data (12:30am Sydney time) will be crucial for the Bank of Canada’s next rate decision and CAD. Markets currently price a 50% chance of a 50bp BoC cut in December. An increase in Canada’s unemployment rate could boost expectations for a larger cut, supporting AUD/CAD and USD/CAD. However, China’s potential fiscal package announcement tonight will likely have a more significant impact on AUD/CAD.
Mid-market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6677 |
| AUD/NZD | 1.1087 |
| AUD/JPY | 102.13 |
| AUD/CNH | 4.7734 |
| AUD/EUR | 0.6181 |
| AUD/GBP | 0.5143 |
| AUD/HKD | 5.1896 |
Chart of the day
Disclaimer:
The market update provided by Corporate Alliance FX (CAFX) is for reference only and does not constitute a bid, levy, offer or invitation to offer for the financial product, the basis for any contract or commitment, a recommendation for the purchase or sale of any investment instruments, financial, legal, tax, investment advice, investment advice or other opinions. It will not be legally liable for any consequences or losses caused by the information or content involved.
Corporate Alliance Group Pty Ltd T/A Corporate Alliance FX (CAFX) (ABN 58 167 119 226, AFSL 523351) (i.e. CAFX), CAFX independently holds the Australian Financial Services licence no. 523351 (AFSL), so CAFX is regulated by the Australian Securities and Investment Commission (ASIC) and, and although ASIC is a strictly regulatory body, it does not endorse a specific financial product. ASIC’s regulation of CAFX applies to all services under the financial licence held by CAFX, including the issuance of foreign exchange settlement, foreign exchange payments, foreign exchange risk control, hedging, market making and providing financial advice.
