The Fed cut rates, BUT they took back 2 of 4 cuts expected in September (only expect 2 cuts in 2025). As a result, the market is only pricing in an 8% chance of a cut in January and only 35 basis points of cuts by the end of 2025 (even more hawkish than the Fed).
- The dollar moved higher closing the day near the highs for the major currency pairs.
The US stocks moved sharply lower yesterday:
- The Dow industrial average is now down for 10 consecutive days. It's decline for today is its worst single day since August 5 when the index fell -2.6%. The index fell -2.58%
- The S&P index fell at its worst day also since August 5 when the index fell -3.0%. The index fell -2.95%.
- The NASDAQ index had its worst day since July 24 when the index fell -3.64%. The index fell -3.56%
Add the fall in the Russell 2000 which fell -4.39% and it was a bad day
US yields moved higher with double-digit gains in the 2 year (Up 11.2 bps to 4.359%), and the 10 year (up 12.5 bps to 4.52%).
In trading today, the USD is mixed (and volatile), US futures are implying a higher open (S&P up 39 points, the Dow up 257, and the Nasdaq up 150 points), the US yields are mixed with the 2 year down a couple basis points and the 10 year up about 4 basis points.
The Bank of Japan kept rates unchanged. BOJ Ueda said:
- Japan economy is recovering modestly, although some weakness seen
- Hard to say if incoming data will be sufficient to support January hike
- Need more data on wages (which may imply waiting on hikes).
- Need to gauge situation for quite a while on both wages and possible Trump tariffs
- If we decide not to hike, we will consider that decision as a safe one
- There is of course the risk of falling behind the curve in waiting
- But we will consider said risk if we were to decide to skip a rate hike in January
It sounds like no rise and the USDJPY is moving higher (lower JPY) as a result.
The BOE kept rates unchanged as well. The surprise was the vote which had 3 dissenters who wanted to cut rates. That has sent the GBPUSD back lower (the USD higher) after the pair had moved higher in the early European session. Below are the main points from the BOE statement this morning.
- Bank rate vote 6-3 vs 8-1 expected (Dhingra, Ramsden, Taylor voted to cut bank rate by 25 bps)
- A gradual approach to removing monetary policy restraint remains appropriate
- We can't commit to when or by how much we will cut rates in 2025 as economic uncertainty is high
- Services consumer price inflation has remained elevated
- Remaining domestic inflationary pressures are resolving more slowly
- Most indicators of UK near-term activity have declined
- Labour market is broadly in balance
Taking a snapshot of the major currency pairs vs the USD, the USD is higher vs the JPY by 1.34%, but lower vs the other currencies with declines of -0.53% vs the AUD --0.59% vs the CHF, -0.58% vs the CAD and -0.59% vs the NZD.
The video below outlines the technicals in play vs the 3 major currency pairs - the EURUSD, USDJPY and GBPUSD after the fireworks over the last 18 or so hours of trading.
In other markets this morning:
- Crude oil is down $-0.23 or -0.33% at $69.73
- Gold is trading up $21 or 0.0% at $2605 after tumbling $-61 during yesterday's trading
- Bitcoin is trading up about $1700 a $101,925
On the economic calendar today,
- GDP final for Q3 is expected 2.8%
- Initial jobless claims are expected and 230K with continuing claims expected at 1.890M
- Philly Fed is index expected at 3.0 versus -5.5 last month
- Existing home sales is expected to rise to 4.07M from 3.96M last month (10 AM ET)
- Canada's average weekly earnings for October will be released at 8:30 AM. Last month it came in at 5.16%
This article was written by Greg Michalowski at
www.forexlive.com.
