Financial markets expect Fed to cut rates tomorrow and will scrutinize comments for future rate moves
Peter Compton | October 29, 2019
The FX markets are quiet with the US dollar giving back early morning gains. Most market practitioners are focused on tomorrow’s Federal Reserve rate announcement and Friday’s Non-Farm Payroll numbers for October.
Tristan Tzara, Romanian poet
“In principle, I am against principles”
October 29, 2019
EUR/USD 1.1097 GBP/USD 1.2865 USD/CAD 1.3067 AUD/USD 0.6854 USD/JPY 108.96 USD/CNH 7.0625 USD/ILS 3.5312 USD/MXN 19.1102 USD/CHF 0.9948 USD/INR 70.8438
USDYesterday on Wall Street, equities reached new highs, fueled by optimism of a trade deal with China and expectations of an additional rate cut from the Federal Reserve at tomorrow’s meeting. Earnings season has been strong, but the dollar has been flat to slightly weak on safe-haven asset selling. House prices in the US came in slightly weaker than expected.GBPThe pound rallied in volatile trading again this morning after the opposition party agreed to an early election. FX markets now expect a negotiated Brexit as the most likely scenario or perhaps a second referendum vote.EUR
The euro is stuck in a tight 1.10-1.11 range vs. the US dollar while hitting record highs vs the Norwegian krone.
The EU granted a “flextension” for the UK to withdraw from the member bloc by Jan 31 2020, however, they are happy to bring the date forward if a deal is fully agreed in UK parliament.CAD
The Canadian dollar continues to rally and has now hit a 3-month high relative to the US dollar, despite oil prices falling by over 1% this morning. Markets expect the Fed to cut rates and the Canadian central bank to leave rates unchanged tomorrow resulting in a 1.75% benchmark rate for both countries.ASIA/PACIFIC
Inflation in Japan remained flat for October, with YoY CPI ex-fresh food increasing 0.5%, missing forecasts. The data is unlikely to alter the near term path of policy for the Bank of Japan who are expected to hold rates steady at Thursday’s meeting.
The Australian dollar gained vs. most all currencies as risk-on sentiment led speculators to buy the A-dollar and sell safe-haven currencies like the US dollar and Swiss franc.
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