Good morning
US inflation yesterday offered little in the way or surprises, coming in pretty much as expected. Headline CPI of 2.5% and a core reading of 3.2% has given the market more reason to look for a 25bps cut next week, and the US dollar pushed higher as a result. GBPUSD hit a low of 1.3000 after the release, while EURUSD reached 1.1000. US stocks pushed higher, the S&P 500 closed up 1% while the Nasdaq gained more than 2%. GBPUSD and EURUSD have staged something of a recovery, now 1.3050 and 1.1015, which leaves GBPEUR at 1.1845.
We do have US PPI later today, this has been known to push USD around from time to time but it would take a very soft reading for the market to change its mind on the size of the cut we’ll get next week.
The highlight today will be the ECB rate meeting, where it is expected they will announce a 25bps cut to take the main rate to 4% and the deposit rate to 3.5%. As always we’ll be looking for any guidance as to rate moves for the rest of the year, although I don’t think Lagarde will want to give too much away, preferring to continue the ‘meeting by meeting’ approach to decision making. For now, 25bps cuts at the October and December meetings look probable.
There is much attention on the ECB rate meeting today and the Fed meeting next week. Less has been said about the UK’s BoE rate meeting that also takes place next week. We’ll have had the latest UK inflation numbers by the time the rate meeting takes place. However, while US and Europe can look forward to lower rates, there is a strong feeling that UK will keep rates on hold this time around.
Aussie inflation expectations dropped a little overnight from 4.5% to 4.4%. While any lower inflation is welcome, it remains well above RBA’s targets and as such I’m not looking for RBA rate cuts any time soon. Indeed, RBAs Bullock confirmed back in August that they had considered a rate rise at the last meeting, making it clear it was far too early to talk of cuts. AUDUSD has traded down from 0.6675 to 0.6625 after the US CPI release, but has since pushed back up to 0.6695. GBPAUD had been close to 1.9700 yesterday morning is now 1.9510 having briefly dipped below 1.9500 this morning. This was the second time this week we have failed at 1.9700.
It’s another chilly day with temperatures unlikely to break higher than 15°c, although we could be back up to the 20’s next week. Let’s hope so.
Have a great day
- 13.15 ECB rate announcement
- 13.30 US PPI, initial jobless claims
- 13.45 ECB press conference
- 19.00 US monthly budget statement
- 23.30 NZ business PMI
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