US Federal Reserve Hints At Further Cuts
AUD
The Aussie Dollar is looking firm this morning, opening higher as the global mood shifts following the US Fed decision. Asian equities slipped slower, with the ASX down 0.1% and the SHANGHAI COMP down 0.2%. Yesterday saw the release of inflation data from China, with their CPI y/y coming in as expected at 0.7% from 0.2% and their PPI y/y lowering to -2.2% from -2.1%, showing manufacturers still cutting prices to shed excess supply. This morning, the AUD is focusing on the external factors, having digested the RBA's hawkish hold earlier this week. The RBA's statement—that the risks to inflation have tilted to the upside—is still lending solid underlying support to the currency. Now, our attention is squarely on the Labour Force Survey for November today, which is the most crucial domestic release for the month. A strong jobs number would dramatically reinforce the RBA's cautious outlook, while a weak figure could pressure the AUD lower.
USD
The AUD/USD opens significantly higher at 0.6670, benefiting from the clarity provided by the US Fed's final decision of the year. Wallstreet reacted positively to the news, with DOW JONES closing up 1.3%, S&P 500 up 0.8% and NASDAQ up 0.5% As widely expected, the Fed cut its benchmark interest rate by a quarter of a percentage point (25 basis points) to 3.75% from 4%. However, the decision was unusually divided, with three members dissenting. Importantly, the Fed signaled this could be the last rate cut for some time, prioritizing the job market but still pointing out that inflation remains somewhat elevated. This "hawkish cut" effectively manages market expectations by delivering the cut now while signaling prudence for 2026. This forward-looking caution helped the US Dollar stay relatively steady overnight, preventing a massive AUD breakout. Tonight, will see the release of the Unemployment Claims, looking to increase form 191k to 220k, a high reading here would reinforce FOMC’s stance.
EUR
The AUD/EUR is opening at 0.5705, essentially flat. The Euro's primary driver overnight was the US Fed, which overshadowed any European data. European equities took a hit overnight, seeing the DAX down 0.1% and the CAC down 0.4%. ECB President Lagarde Spoke around the Euro at a conference, remaining very natural with her language, not affecting markets. With the Fed decision out of the way, to German and French Final CPI out on Friday, both looking to contract further.
GBP
The AUDGBP opens slightly down at 0.4985, trading in a narrow range after the UK's high-impact releases yesterday. British equities where soft into the close, with the FTSE finishing up 0.1%. Yesterday had no data released, with a busy night ahead. BOE Gov Bailey is set to speak twice with pre-recorded speeches about the economic stability of the UK, which may give traders insight into the future outlook for monetary policy.
NZD
The AUD/NZD opens lower at 1.1478. Despite the overall strength of the AUD's hawkish central bank narrative, the cross has pulled back slightly from its recent highs. Manufacturing Sales q/q came out this morning, showing an increase from -2.8% to 2.7%.