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U.S. equities dipped overnight, with the S&P 500 down 0.8% and the NASDAQ falling 1.4%. The Euro Stoxx 50 ended the day flat, while the FTSE 100 edged up 0.1%. The yield on the U.S. 10-year bond rose by 6 bps to 3.86% as J. Powell might throw cold water on market expectations for aggressive rate cuts this year. On the economic front, the latest data presented a “mixed bag”. Jobless claims indicated the labor market is cooling slowly rather than declining sharply. U.S. manufacturing activity contracted at its fastest pace this year due to further declines in production, orders, and factory employment. Meanwhile, existing-home sales rose for the first time in 5 months.
A series of remarks from U.S. policymakers were highlighted, with Kansas Fed President Schmid expressing a need for more data before endorsing rate cuts. Boston Fed President Susan Collins suggested that a “gradual, methodical pace” would likely be appropriate, a sentiment echoed by Philadelphia Fed President Patrick Harker during a CNBC interview.
U.S. futures continue to suggest that the Fed will ease policy four times by the end of the year, likely with a few 25bps cuts and a 50bps cut starting in September. However, recent data and Fed commentary support a soft-landing scenario, indicating a more gradual rate-cutting cycle. So, expecting a 50bps cut seems unrealistic, doesn’t it?
However, market attention is largely focused on Powell’s update from Jackson Hole on Saturday and BoJ Governor Ueda’s briefing to lawmakers later today. Ueda is set to speak in the lower house and again at the upper house.
Mid market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6706 |
| AUD/NZD | 1.0919 |
| AUD/JPY | 98.06 |
| AUD/CNY | 4.7920 |
| AUD/EUR | 0.6032 |
| AUD/GBP | 0.5121 |
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