The USD is little changed with the DXY index down marginally. THe change in the USD vs the EUR, CAD, GBP is less than 0.5%. The USD is higher vs the AUD (+0.25%) and the NZD (+0.33%) as those currencies continue their move lower and have each broken below key floors on their daily charts (see video from yesterday
HERE).
Below is a technical kickstart video looking at the techncals driving the 3 major currency pairs - the EURUSD, USDJPY and GBPUSD.
US stocks are higher after falling yesterday with the Dow up by 157 points (after 9 days of declines). The S&P futures are implying a gain of 18 points and the Nasdaq is up 66 points.
Yields are higher with the 2-year up 1.6 bps to 4.257% and the 10-year up 3 bps to 4.416%.
Crude oil is up $0.66 or 0.96% at $70.32. Gold is unchanged at $2645.72 and Bitcoin is lower at $105,079 after reaching an all time high of $108,364 yesterday.
The Fed meets today and announces its interest rate decision at 2 PM ET with the expectations of a 25 basis point cut. The focus will be on the dot plot, however, and the other projections that will start the new year. For kicks and giggles, below is what the projections looked like for end of year 2024 at this time a year ago:
- For GDP a year ago, they saw 1.4%. The GDP has been stronger with 4th quarter GDP forecast to be 3.1%
- For the Unemployment rate, they projected 4.1% at the end of 2023. It rose to 4.2% in the last report.
- For PCE inflation they forecast 2.4% for the headline and 2.4% for the Core. The most recent US PCE inflation level is 2.3% as of October 2024, while the core PCE inflation level, which excludes food and energy, is 2.8%
- They forecasted the Fed Funds rate to be 4.50% to 4.75%. or 4.60% . The Fed is expected to cut rates to 4.25% to 4.50% or 4.375%
The most recent projections from Seotember which will be revised today shows:
For 2025 in September, they see the Fed Funds rate moving down 100 bps in 2025 to 3.4%. That will be the focus today and will likely be higher.
Meanwhiler, from the ECB today in Europe,
ECB's Wunsch stated that the impact of tariffs depends on the euro's exchange rate reaction, noting that a weaker euro would cushion the impact on growth but increase inflation. He added that if the euro reaches parity with the dollar, competitiveness losses would be limited. Wunsch expects interest rates to settle around 2%, suggesting that four rate cuts are a meaningful and comfortable scenario. On the inflation target, he emphasized that there is no appetite to change the 2% goal and highlighted that the ECB's role is not to address political or structural challenges. Policy decisions will focus on inflation, wages, growth, and PMIs, though he noted there is no broad consensus on reacting aggressively to inflation below 2%.
ECB's chief economist Philip Lane
Emphasized the importance of a meeting-by-meeting approach to monetary policy, cautioning against pre-committing to specific rate paths. He noted that the disinflation process is progressing well, with domestic inflation expected to decrease further. While financing conditions remain restrictive, Lane reiterated the ECB's determination to stabilize inflation at the 2% target. He also highlighted that the recent 50 bps rate cut was aimed at signaling that monetary policy is no longer restrictive. Lane pointed out that the forward rates curve indicates achieving the 2% target will require additional rate cuts.
At 8:30 AM ET, the US building permits are expected to come in at 1.430 million, with housing starts expected at 1.343 million. The US current account for the Q3 is expected $-284.0 billion.
The weekly oil inventory data is expected to show a crude oil inventory drawdown of -1.635 million and a gasoline buildup 2.060 million.The private data released late yesterday showed:
This article was written by Greg Michalowski at
www.forexlive.com.
