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USD

14 Dec 2023

Christmas comes early to financial markets

The dollar plunged yesterday when the policy elves at the world’s most powerful central bank met markets halfway, indicating they expect to cut rates at least three times next year, and four times in 2025. Perhaps more importantly, a jolly Jerome Powell chose not to fight back against an ongoing loosening in financial conditions in the post-meeting press conference, instead pointing to a series of indicators showing the economy achieving a soft landing and suggesting inflation could come down without a rise in unemployment. Some of the fervour is cooling this morning, but not much. With markets now pricing in...

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13 Dec 2023

Fed pivot jolts markets

• US Fed. A ‘dovish’ pivot by the Fed. Comments & updated forecasts point to the next step being policy easing, with several cuts projected in 2024.• Market repricing. US bond yields tumbled as markets adjusted their thinking. This weighed on the USD & propelled the AUD & risk markets higher.• AU jobs. After a strong Oct., there are risks to the Nov. data. This may exert short-term pressure on the AUD, but it shouldn’t change the bigger USD driven trend. All eyes were on the US Fed meeting and press conference this morning and the ‘dovish’ tilt we were...

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13 Dec 2023

Fed turns less hawkish, telegraphs more cuts in 2024

For a third consecutive meeting, the US Federal Reserve’s policy committee held its benchmark interest rate at a 22-year high, but indicated its tightening cycle was likely done, with easing likely to begin in the new year. After 11 increases since March 2022, the target range for the federal funds rate was maintained between 5.25 and 5.5 percent. In a slightly more dovish statement, officials acknowledged that “inflation has eased over the past year,” and softened language to suggest that incoming data would be monitored to determine whether “any” additional policy firming would be appropriate. According to the accompanying “dot...

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13 Dec 2023

Markets wait to exhale

Equity futures are setting up for a positive open, Treasury yields are flat across the curve, and the dollar is holding steady ahead of this afternoon’s Federal Reserve decision. Yesterday’s November inflation report showed price growth levelling off well below post-Covid highs, while also remaining above the Fed’s comfort threshold. Underlying inflation accelerated on a month-over-month basis, and the so-called “supercore” measure—core services excluding shelter costs—often mentioned by Jerome Powell, climbed at an annualized 5.2 percent. According to a separate report, real earnings climbed 0.8-percent in the year to November. This doesn’t mean that progress in reducing inflation is reversing—the...

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12 Dec 2023

US Fed in the spotlight

• Market swings. Some intra-session vol. around the US CPI. But net market moves have been modest. USD softer, though lower oil prices held down the AUD.• US inflation. Data matched predictions. Headline inflation slowed to 3.1%pa, while core steady at 4%pa. Firmer services shows the last leg could be difficult.• US Fed. No policy change expected. While the Fed should reiterate it may do more if needed, we think the forecasts should show that the next move will be a rate cut. There has been a bit of market volatility overnight around the release of the latest US CPI...

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