Daily Market Commentary
The markets closed out a huge week, dominated by the Fed's decision, to cut interest rates by 50 basis points. This kicked off the cycle of rate cuts and easing monetary conditions, long awaited. This was expected, although the 50 points may have surprised many, but the easing cycle has begun. This was welcomed by equity markets in the US, which surged to record highs, although this is often a foreboding of a recession. Central Bank easing cycles are delayed and historically they have come too late to prevent a recession. This can be seen in Europe and New Zealand. The market focus will therefore turn to growth and economic activity. All eyes will turn to the US Q2 GDP number, set to be released, this coming week. The other important factor to note is the timing of the, larger than expected rate cut, only weeks before the US election. The Dollar was steady, with the EUR trading just above 1.1150, while the GBP regained 1.3300.
The static reserve allowed commodity currencies to consolidate, with the AUD holding 0.6800, while the NZD trades above 0.6200. The big mover on the FX markets was the Yen, which crashed to 144.50, following the surprisingly neutral stance of the Bank of Japan. Japanese inflation has been climbing steadily, up to 3%, which is historically very high for the 'land of the rising sun'. The Bank of Japan had begun to raise interest rates, to combat this, but the BoJ Governor slammed the door shut on this tightening policy. This coming week will focus on growth, while the Australian market will be keenly watching the latest decision from the RBA.
Weekly Market Commentary
23/9 NZ Trade Exports/Imports, Australia Services/Manufacturing/Composite PMI, UK/France/German/EU Services/Manufacturing/Composite PMI, US Services/Manufacturing/Composite PMI
24/9 Japan Services/Manufacturing/Composite PMI, RBA IRD, German Ifo Business Confidence, S&P Case-Shiller House Price Index, Richmond Fed Manufacturing Index
25/9 Australia CPI, US Weekly Mortgage Applications, US New Home Sales, Bank of Japan Minutes
26/9 German/France Consumer Confidence, Chicago Fed National Activity Index, US Durable Goods Orders, US Q2 GDP, US Weekly Jobless Claims, Bank of England Hearing, Fed's Powell Speech, Kansas City Fed Manufacturing Index, NZ Consumer Confidence, Tokyo Inflation
27/9 France CPI, German Employment, EU Consumer Confidence, Canada GDP, PCE Inflation Indicator, US Personal Income/Expenditure, University of Michigan Economic Sentiment
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