The Reserve Bank of New Zealand cut interest rates by 50 basis points causing the New Zealand dollar to fall against all major currencies. The largest decline was against the US dollar by -1.32%, and the US dollar was the strongest among the major currencies today:
US CPI data will be released tomorrow with expected gains of 0.1% in the headline and 0.2% in the core. This data will be released at 8:30 a.m. tomorrow along with initial weekly unemployment claims.
Technically, the pair moved lower to test the target of 61.8% of the upside move from the early August low of 0.60509.
USDJPY continues its move higher ahead of tomorrow’s CPI data and is testing the highest level since August 16 at 149.356. This will also be a key metric for buyers and sellers on the new trading day. The move above will be more bullish with the 50% and 100/200 day moving averages as upside targets in the new trading day. . Staying below will keep sellers in position at 38.2% at 148.11 target.
USD/CHF rose and is testing the highest level from last Friday after stopping near the top of the red box during yesterday’s downward correction. A move above last week’s high at 0.8607 would then target the 38.2% level of the downside move from the July high at 0.86312. Reaching and staying above this level is essential to show buyers are serious about moving this pair higher after a downtrend.
Essentially, the Fed minutes from the September meeting where the Fed cut interest rates by 50 basis points said:
Minutes from the Fed’s meeting revealed that a “large majority” supported a 50 basis point rate cut, with “almost all” participants agreeing that inflation risks have diminished, while downside risks to employment have increased. Although some members favored a smaller 25 basis point cut due to persistent inflation concerns and strong economic growth, the committee gained confidence that inflation is moving towards the 2% target. Employment and inflation risks are now seen as roughly balanced, with the economy expanding at a strong pace and unemployment remaining low. The committee indicated that it will carefully evaluate future data before making additional adjustments to interest rates, anticipating a gradual move towards a neutral policy stance.
Lori Logan, President of the Federal Reserve Bank of Dallas, said earlier today:
Dallas Fed President Logan indicated that a “more gradual” approach to interest rate cuts is likely appropriate going forward, given the upside risks to inflation. She expressed concern that inflation may remain above the Fed’s target and stressed the importance of not rushing to cut interest rates. A gradual reduction in interest rates would give the Fed more time to assess how restrictive current policy is and help balance labor market risks without overcooling them. Logan acknowledged that progress on inflation has been broad-based and that the labor market has slowed but remains healthy. However, it warned that stronger-than-expected economic growth and spending could increase inflationary pressures. Despite her hawkish stance, Lujan is not calling for a pause on interest rate cuts.
In the US stock market today, the major indices closed higher, with both the Dow Jones and Standard & Poor’s indices closing at record levels:
- The Dow Jones Industrial Average rose 431.63 points, or 1.03%, to 42,512.00 points.
- The Standard & Poor’s index rose 40.91 points, or 0.71%, to 5,792.04 points.
- The Nasdaq index rose 108.70 points, or 0.60%, to 18,291.62 points.
The Russell 2000 small-cap index rose 5,601 points, or 0.26%, to 2,200.58 points.
In the US debt market, yields are closing near highs with the two-year yield back above 4,000%:
- The two-year yield is 4.023%, +4.5 basis points
- 5-year yield 3.918%, +5.3 basis points
- The 10-year yield is 4.075%, +4.0 basis points
- The 30-year yield is 4.343%, +1.9 basis points
The US Treasury auctioned 10-year bonds with mixed results. Domestic demand was low but international demand was very strong. There was a positive tail that brought the auction grade down toward C+
Oil inventories rose but the increase was smaller than private data. Maybe the gains are due to the hurricane? Just a guess but they were nowhere near as expected.
- Crude oil inventories +5810 vs. +2048K expected
- Gasoline stocks -6304 thousand compared to -1123 thousand expected
- Distillate inventories -3124K vs. -1865K expected
- Refinery utilization -0.9% vs. expectations of -0.1%
Private oil inventory data late yesterday:
- Ore +10900K (Mega Building)
- Gasoline -557 thousand
- Distillate -2590 K
The price of crude oil is trading -$0.25 lower on the day at $73.32.
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