Market Update 19/09/2024

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

This morning’s focus was on the Fed, which kicked off its easing cycle with a larger-than-expected 50bps cut to the Fed Funds Rate, lowering it from 5.50% to 5.00%. The Fed chose a bigger cut than the anticipated 25bps, reflecting greater confidence that inflation is on track to reach the 2% target and that risks to employment and inflation are more balanced. The larger move suggests the Fed aims to bring policy closer to a neutral stance. They signalled more rate adjustments could follow, depending on incoming data, outlook changes and risk assessments.

The Fed also revised its projections, now expecting 50bps of cuts by year-end and an additional 100bps in 2025. Their long-term rate forecast was raised slightly to 2.9% from 2.8%. In its updated economic outlook, the Fed increased its unemployment forecast and slightly lowered inflation expectations compared to June.

US Treasury yields, which had risen modestly before the decision, dropped sharply afterward, especially on shorter-term bonds. The 2-year yield hit a new cycle low of 3.54% before partially recovering, while the 10-year yield remained steady around 3.68%.

The USD weakened significantly, posting broad losses against G10 currencies. The DXY (dollar index) hit a new low for 2024, dipping below December’s 100.6 mark before recovering slightly as Powell addressed the press.

NZDUSD rose on the back of a weaker USD, reaching a high of 0.6268 before retreating to 0.6205. Volatility is expected to ease as the market adjusts to the surprise. For the NZD, attention now turns to today’s GDP data at 10:45 am NZT, which will influence expectations for the RBNZ’s October decision. Level wise, support sits at 0.6200, 0.6170 & 0.6135 with resistance around 0.6270, 0.6305 & 0.6335

NZDAUD is modestly higher to 0.9180. The ABS will release its labor data today at 1:30 pm NZT, with Australia’s unemployment rate expected to remain steady at 4.2% in August. Employment change is forecasted at 26k, a significant drop from the 58.2k seen in July. This signals a softening labor market, which could support the case for an interest rate cut by the RBA.

NZDJPY is on a three-day winning streak, rising to 88.25. Key support levels sit at 87.00, 86.50 & 86.00, while resistance is at 88.50 and 89.00 on a 20-day moving average. The BoJ will meet to discuss interest rates on Friday, 20th September, the same day Japan’s inflation data for August is released, with inflation expected to rise from 2.80% to 3.00%. Like New Zealand two years ago, Japan is facing “wage-push” inflation. While the BoJ is unlikely to raise its current 0.25% interest rate at this meeting, the messaging will likely indicate that rate hikes are on the horizon.

Today’s economic calendar highlights NZ GDP data at 10:45am and Australia’s employment and unemployment figures at 1:30pm. Later this evening, the Bank of England is widely expected to keep rates steady at 5.0%, following the 25bps cut introduced in August.

 Here are the latest mid-market rates:

 
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