AUD/USD Drops as Rate Cut Bets Soar, USD Reverses Fed Induced Gains - US Market Open
JPY / CHF: Safe-haven currencies slightly firmer throughout the European session following the BoJ’s and SNB’s decision keep rates on hold. Alongside this, the SNB refrained from downgrading its rhetoric on the Swiss Franc, stating that it remains highly valued as opposed to significantly overvalued, despite the fact that CHF had recently been trading at a 2yr high vs EUR, which had prompted a step up in FX intervention.
AUD: Overnight, the Australian Dollar came under selling pressure, underperforming against its major counterparts following the latest Australian jobs market report. While employment change rose, this had largely been attriubuted by part-time jobs, while full-time positions had contracted. Consequently, the underployment rate rose 0.2ppts to 8.6%, while the umployment rate also edged higher, providing concerns for wage growth going forward, despite the fact that the RBA have cut rates twice. In turn, this has boosted RBA rate cut expectations, which has sharply risen to 80% from 25% at the beginning of the week, as such, this makes October a live meeting. That said, AUD watchers will be paying close attention to Governor Lowe’s speech on September 24th.
USD: The hawkish dissappointment from the Federal Reserve had been short-lived with the US Dollar paring much of its Fed induced gains, while gold prices regained the $1500 level. Going forward, eyes will be on the US-China trade war developments with reports in SCMP suggesting that Beijing experts see an interim trade deal being reached.
GBP: The Bank of England left its monetary policy tools unchanged with a 9:0 vote as expected. Unsurprisingly, the monetary policy statement was largely a reiteration from the prior month with the central bank continuing to highlight that rate rises will be gradual and limited provided that there is a smooth Brexit and a recovery in the global economy. Consequently, given that outlook regarding the future relationship between the UK and EU remains unknown, the Bank of England are forced to sit on their hands and enforce a wait-and-see approach. Elsewhere, in light of expectations that Article 50 will be extended to the end of January 2020, the BoE noted that political events could lead to a further period of entrenched uncertainty, resulting in demand growth remaining below potential. Muted reaction seen in GBP/USD and FTSE 100.
WHAT’S DRIVING MARKETS TODAY
- “GBPUSD Price Slips Lower as UK Inflation Falls to a Near Three-Year Low” by Nick Cawley, Market Analyst
- “Gold Price Outlook at a Crossroads, Make or Break Time” by Paul Robinson, Currency Strategist
- “USD/CAD, AUD/USD Volatility Soars on Federal Reserve Rate Decision Risk” by Justin McQueen, Market Analyst
- “Using FX To Effectively Trade Global Market Themes at IG” by Tyler Yell, CMT , Forex Trading Instructor
--- Written by Justin McQueen, Market Analyst
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