Fed to cut or not to cut

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This post was originally published on Trademakers

courtesy of trademakers

Last week the US Dollar claimed the title of strongest currency of the week as the markets priced in rate cut rationale began to dissipate. This was also coupled with a strong risk on week as equities continued their stella run.

The Fed dismissed any rate cut in March during Fed Chair Powell’s post rate press conference. This coupled with strong NFP figures with strong wage growth led the market to re-evaluate the timing of policy easing.

 

The Euro and GBP failed to gain any uplift.

 

Both closed better than their midweek lows gaining back after central bank narratives and economic releases.

 

ECB officials are giving indication of a cut somewhere between April and June and this timeline fits with the current economic data with EU GDP flat in Q4.

 

The BOE meeting highlighted that rate cuts are still some way away. The split vote not seen since 2008 saw 2 vote for a hike and 1 vote for a cut. Chief Economist Pill stated rate cuts were a way of citing insufficient evidence to show inflation returning to target levels.

 

Commodity currencies continued to struggle and no more than AUD which was the worst performer of the week. Domestically the Q4 CPI has firmed the market that no timeline for rate reductions. The current downturn in Chinas stock market is also weighing on the AUD as concerns over the economic stability of the Chinese market.

 

The week ahead continues with heavy data. We have US ISM Services index along with rate decisions from RBA and Boc.

Weekly Majors’ Market Performance

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