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It was a ‘risk on’ on global markets after yesterday’s 50bps rate , raising optimism that the Fed can achieve a soft landing. US Treasury Secretary Yellen echoed this sentiment, calling the Fed’s action a positive step for the economy, while noting that policy remains restrictive. Equities saw gains across the board, with the S&P 500 up 1.9% and hitting a record high. The Euro Stoxx 50 climbed 2.2%, and the FTSE 100 rose by 0.9%. The US yield curve steepened, as 2-year yields fell by 2.3bps to 3.59% and 10-year yields rose by 2.3bps to 3.73%.
US economic releases overnight were second-tier, but unemployment claims unexpectedly dropped by 12k to 219k, marking the lowest level since May. This suggests the job market remains strong despite slower hiring.
The USD weakened against most G10 currencies in the past 24 hours, except for the JPY.
AUDUSD bounced back overnight to around 0.6810. Markets may remain volatile as sentiment shifts between a soft and hard landing, especially since data trends are rarely straightforward.
AUDNZD continued its downward trend, reaching 1.0922, driven by stronger Australian data compared to New Zealand’s. Australia’s August labour report was solid, with employment rising by 47.5k, beating expectations, and unemployment holding steady at 4.2%. The 100-day moving average at 0.9125 is notable, and 0.9100 could be the next target.New Zealand’s GDP report yesterday revealed a 0.2% contraction in Q2, seasonally adjusted, which was in line with expectations. This supports the RBNZ’s ongoing approach of cutting rates by 25bps per meeting.
AUDJPY climbed past 97.21, while USDJPY momentarily reached 144.00 before retreating to 142.60. The BoJ is set to announce its official cash rate later this afternoon, with no changes anticipated.
AUDGBP has fallen below 0.5129 after reaching 0.5155. The Bank of England kept interest rates steady at 5% following stable inflation in August but signalled potential rate cuts as early as November. The decision by the Monetary Policy Committee, with eight members in favor and one against, comes after a 0.25% rate cut last month. The GBP gained strength following the announcement.
Looking ahead, all eyes will be on Japan where CPI data will be released at 11:30 am NZT, ahead of the Bank of Japan’s policy announcement. As the trading week wraps up, UK Retail Sales will start the offshore session at 6:00 pm NZT, followed by EUR Consumer Confidence early Saturday morning. Additionally, ECB President Lagarde and FOMC Member Harker will both be speaking.
Chart of the day
Mid-market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6812 |
| AUD/NZD | 1.0921 |
| AUD/JPY | 97.19 |
| AUD/CNH | 4.8161 |
| AUD/EUR | 0.6103 |
| AUD/GBP | 0.5129 |
| AUD/HKD | 5.3090 |
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