Fed nerves grip markets
Global markets were mostly cautious heading into the weekend as investors looked ahead to the key US Federal Reserve decision due Wednesday night.
While financial markets are pricing in a 104% probability of a rate cut — seen as virtually certain, with a chance of a 50bps move — investors remain nervous that the Fed may not commit to further easing.
The risk of a “stop-start” rate-cutting cycle weighed on US sharemarkets Friday, with the S&P 500 down 0.1% and the Dow Jones off 0.6%. The tech-heavy Nasdaq bucked the trend, gaining 0.4%.
The AUD/USD slipped 0.2%, turning lower from 10-month highs.
The NZD/USD fell 0.4% from one-month highs.
The USD/SGD and USD/CNH both rose 0.2%, climbing from recent lows.
Japan and US reaffirm hands-off currency stance
The US Treasury and Japan’s finance ministry reaffirmed their commitment Thursday to allow currency values to move freely, without interference. Echoing their G7 pledge, both sides agreed that exchange rates should be driven by market forces, not adjusted for competitive advantage.
They’ll now disclose currency-related actions at least monthly and limit intervention to cases of extreme volatility. In a joint statement, they clarified that government-backed investment funds, including pension programs, will seek overseas opportunities for diversification and better returns, not to influence exchange rates.
Meanwhile, the dollar-yen pair is holding above a key technical level—the 50-day EMA is at 147.25. Traders are watching 149.14 as the next potential ceiling.
Central banks in focus as FX volatility looms
A high-stakes week for FX markets as the US Federal Reserve is expected to deliver a 25bps rate cut at its FOMC meeting Thursday morning, lowering the upper bound to 4.25% from 4.50%. The decision, set for Thursday Asia time, will draw global attention, with markets watching closely for dovish signals in the statement and projections.
The Bank of Canada meets Wednesday and is expected to cut rates by 25bps to 2.50% (prior: 2.75%) amid subdued inflation. The Bank of England announces Thursday, likely holding at 4.00% as inflation remains sticky. The Bank of Japan rounds out the week Friday, expected to maintain its 0.5% target rate.
UK August CPI (prior: 3.8% YoY) is due Wednesday, with both headline and core figures in focus. The Eurozone’s final August CPI (prior: 2.1%) and Canada’s August CPI (prior: 1.7% YoY) will also be key for policy outlooks.
US retail sales (consensus: +0.3% MoM), industrial production (consensus: 0.0%), and the Leading Index (-0.1% MoM) will offer fresh growth signals. China’s August retail sales and industrial production (3.8% and 5.6% YoY, respectively) will be scrutinized for signs of recovery.
Germany’s ZEW Survey, UK labour data, Australia’s jobs report, and New Zealand’s
Aussie reverses from highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 15 – 19 September
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
