Market Update 11/09/2024

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US equities showed mixed performance ahead of the key CPI data release tonight (NZT). The S&P 500 was up 0.3%, the Dow Jones down 0.3%, and the NASDAQ gained 0.7%. In Europe, the Euro Stoxx 50 dropped 0.7% and the FTSE 100 declined 0.8%. Meanwhile, the yield on the US 10-year fell by 6 bps to 3.64%.

Brent oil futures fell below $70 per barrel for the first time since December 2021, extending a price drop driven by strong supply, demand concerns, and heavy speculative selling. WTI crude dropped by as much as 4.2% to its lowest level since May 2023. Weak economic data from the US and China, including disappointing import figures, have raised fears about demand in the two largest oil consumers. This has added to concerns about a potential surplus next year, with record bearish sentiment, further exacerbated by rising output from non-OPEC producers.

The USD had mixed performance ahead of the key US CPI data release tonight (12:30 am NZT), which might provide clarity on whether markets should anticipate a 25 or 50 bps rate cut at next week’s Fed meeting. 

NZDUSD is slightly higher around 0.6150, fluctuating within a 30-point range over the past day as the market waits for the US political debate and inflation data. Currently, NZD is near a support level at 0.6150, with key levels below at 0.6140 on Fibonacci level and 0.6100, with the 200-day moving average sitting right at that mark. On the upside, resistance is expected around 0.6190 & 0.6200 before reaching another Fibonacci level at 0.6230. If US inflation figures meet expectations, there may not be much reaction, but a significant downside surprise could increase support for a 50bp rate cut and potentially pressure risk assets, impacting the NZD.

NZDAUD has risen to 0.9245, while AUDUSD has stayed relatively stable trading between 0.6640 and 0.6676. Exporters are expected to emerge around the 0.6600 level, while importers would be interested in the 0.6750-60 range.

NZDJPY has dropped to 87.55 as the yen strengthened amid declining global interest rates, with USDJPY falling 0.5% overnight to 142.35. Bloomberg reported that Bank of Japan officials see little reason to raise interest rates at their meeting next week, aligning with market expectations, as they continue to monitor financial market volatility and the effects of the July rate hike.

NZDEUR edged up overnight, reaching 0.5583. The upcoming ECB policy meeting is weighing on risk sentiment, with expectations of a second 0.25% rate cut. The market is pricing 2.5 rate cuts for the remaining three meetings this year, meaning two full 0.25% cuts and an additional smaller reduction like a partial cut (such as 0.10% or 0.15%) across the remaining meetings. If expectations shift closer to three cuts, the EUR is likely to weaken against the USD, which could push NZDEUR higher.

Today is quiet on the local data front, with only migration figures coming out at 10:45 am, which typically don’t have much impact. In Australia, RBA Assistant Governor Hunter will be speaking at 12:20 pm NZT today at the Barrenjoey Economic Forum in Sydney. This evening, UK GDP will be released at 6:00 pm, but the main focus will likely be on the US CPI report tonight at 12:30 am.

 Here are the latest mid-market rates: