USD pulls back after rate cut - plenty of data ahead
Don’t forget: Today was supposed to be Brexit Day. Again.
USD: EUR/USD rose last night (breaking through 1.1150 for the second time this month, and only the 3rd time since mid-August. The US central bank cut interest rates as expected, but suggested that they will pause cutting further. 2 members voted against any cut at all. 3 cuts in 2019 have been delivered, and Chairman powell will be hoping this is enough to steer the US out of the turbulence of economic headwinds.
The US will now watch very closely the statistics around inflation, service sector performance and employment. This places extra emphasis on tomorrow afternoon’s Employment data – everyone will be watching the USD for indications.
CNBC article: https://www.cnbc.com/2019/10/30/fed-decision-interest-rates-cut.html
Importantly, the meeting of Trump and Xi was supposed to take place in Chile next month, but due to civil unrest, this has been cancelled. This meeting is due to announce a ‘Phase One’ trade agreement between the 2 nations, and the market will be nervous until an alternative location is found for these leaders to meet – this will keep the USD in check in the very short-term.
EUR: Eurozone GDP and inflation figures this morning will hopefully bring cheer to the EURO. With Germany close to a technical recession, not helped by poor retail sales numbers yesterday, there is still not much enthusiasm to buy the EUR. If CPI (inflation) falls, as expected to 0.7% in October, the market may sell EUR once again.
A positive surprise in growth and inflation data might push EUR/USD through 1.1200 and take GBP/EUR through 1.1600.
CAD: The Canadian dollar weakened dramatically yesterday (after a relatively solid recent performance due to oil price rebound). The central Bank did NOT cut rates, but signalled a very cautious tone, stating: ”risks are more tilted to the downside than before” – GBP/CAD a big mover above 1.6900 and USD/CAD through 1.3200
China: Manufacturing and service data overnight BOTH were below expectations, and blame will no doubt be placed on the continuing trade wars and the global slowdown. After poor growth data last month, expectations remain low for Chinese growth. This will have a knock-on effect to the Australian Dollar which is reliant upon the success of China.
Indeed, AUD declined overnight after reaching 3month highs recently. In New Zealand, many economists expect a cut in interest rates when the Aus central bank meets in Nov – a cut late this year, or early next, will depend on the global economy and also the domestic climate in Australia.
Turkey: The embattled economy was in the spotlight after inflation data was downgraded yesterday, and the central bank said that its monetary policy stance was in line with it’s policy to encourage disinflation. This suggests a lessening of the ‘panic’ that has beset the economy for a while.