The Greenback shed weight across the board after market participants stepped up bets of an additional 50 bps jumbo rate cut from the Fed in November. Markets have quickly absorbed the Fed’s first rate cut in four years, and are pivoting into hopes for more.
Here is what you need to know on Wednesday, September 25:
The US Dollar Index lost further ground on Tuesday, pushed lower by rising expectations of further double rate cuts from the Federal Reserve (Fed) in November as a follow-up to September’s 50 bps jumbo rate slash. Rate markets are now pricing in 60% odds of a second 50 bps rate cut on November 7, with the remaining 40% expecting a more reasonable 25 bps.
EUR/USD rallied heading into the midweek after kicking off the trading week with a bearish pullback. Still, the pair is getting buoyed by Greenback weakness rather than any particularly bullish Euro flows.
GBP/USD found yet another 30-month high as the Pound Sterling rally continues unabated, but Bank of England (BoE) Monetary Policy Report Hearings due later in the week on Thursday could trip up Cable bulls.
USD/JPY eased back on Tuesday, flubbing a bullish push to try and recapture the 146.00 handle. Bank of Japan (BoJ) Governor Kazuo Ueda reiterated early Tuesday that the BoJ remains in no real rush to raise policy rates, crimping hopes for further hawkish moves from the Japanese central bank.
AUD/USD also found a new 14-month high on Tuesday, rallying despite the Reserve Bank of Australia (RBA) keeping rates pinned on Tuesday. The RBA’s latest rate hold could prove to be poorly timed, depending on how Australia’s Monthly Consumer Price Index (CPI) prints early Wednesday.
Gold continues to grind its way higher as the Greenback falls across the board. XAU/USD is soaring toward $2,700, marking in steady day-on-day record all-time highs. Gold is up just under 30% YTD in 2024.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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