Market Update 09/09/2024

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
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Stock markets softened on Friday in response to the US August labor market report. The S&P 500 dropped 1.7%, driven lower by losses in tech stocks, while the Nasdaq fell 2.6%. In Europe, the Euro Stoxx 50 ended the day down 1.6%, and the FTSE 100 declined by 0.7%. Meanwhile, the yield on the US 10-year dipped 2 bps to 3.71%, influenced by remarks from Fed Governor Waller, who expressed openness to a more significant rate cut in September.
 
US nonfarm payrolls rose by 142k in August, falling short of consensus expectations, while the unemployment rate dipped from 4.3% to 4.2%. There was a two-month downward revision of 89k, in line with the trend seen over the past two years. The three-month payroll average now stands at 116k, well below the estimated 200k monthly gain needed to maintain labor market balance. With inflation nearing the Fed’s target, achieving the full-employment mandate suggests that interest rates must be lowered.
 
Market expectations for a 50bp rate cut next month rose after Fed Governor Waller expressed that he believed the time for cuts had arrived and was “open minded” about the pace. He mentioned he would support larger cuts “if the data warrants it,” though the market seemed to overlook the conditional nature of his remarks. Meanwhile, NY Fed President Williams noted that risks to both employment and inflation are now balanced, though he emphasized that while further labor market weakness is undesirable, the Fed has not yet reached its inflation target.
 
NZDUSD briefly spiked to test 0.6250 just before the payroll data, but after the release, sentiment turned negative, closing 0.7% lower around 0.6175. As is often said, global factors drive Kiwi sentiment, so much will depend on whether we see a relief rally in big tech this week, especially with growing speculation about potential rate cuts. There’s plenty of room for a rebound, which could lead to USD selling and NZD stabilizing or moving higher. However, any unexpected risk-off event which is always hard to predict might continue to strengthen the USD.
 
NZDAUD is slightly higher at 0.9258, with AUD taking a bigger hit, giving the NZD a lift. Bids might drift towards the 200-day moving average at 0.9220. Initial resistance sits around 0.9260, with stronger resistance closer to 0.9300.
 
NZDJPY dropped below 88.00, falling by over 1%. Meanwhile, USDJPY appears likely to retest its August low around 141.70.
 
The week is starting off quietly with no local economic releases. Attention will be on Japan’s GDP data at 11:50 am and China’s inflation data at 1:30 pm NZT.

 Here are the latest mid-market rates: