Today’s News
The U.S. dollar strengthened against major currencies on Tuesday after Federal Reserve Chair Jerome Powell pushed back against expectations of more significant interest rate cuts. Powell’s hawkish tone suggested that the Fed is not in a rush to lower rates further, signaling a likely preference for quarter-point cuts going forward.
Image Source: The Edge Malaysia
Meanwhile, the euro remained near a one-week low after data showed German inflation falling to its lowest level since early 2021, fueling speculation of another rate cut by the European Central Bank later this month. In Japan, the yen steadied after a volatile two days as traders assessed the implications of Japan’s incoming prime minister and his cabinet.
Australia’s dollar also held steady after hitting its highest point since February of last year, boosted by stimulus measures in China, the country’s top trading partner.
Powell’s comments at a Tennessee conference reinforced expectations that the Fed would continue its cautious approach to rate cuts. “This is not a committee that feels like it is in a hurry to cut rates quickly,” Powell said. Traders still expect the Fed to cut rates at its November meeting, though the probability of a 50-basis point cut dropped to 35.4%, down from 53.3% a day earlier, according to CME Group’s FedWatch Tool.
Powell’s remarks came ahead of a significant week for U.S. economic data, including manufacturing and non-manufacturing reports from the Institute for Supply Management and the monthly jobs report on Friday, which could prove pivotal for the Fed’s next steps.
The dollar index gained 0.07% to reach 100.85, following a 0.3% rise on Monday. Against the yen, the dollar rose 0.23% to 143.95, after swinging between 146.495 yen on Friday and 141.65 yen on Monday.
Image Source: Politico
In Japan, Shigeru Ishiba, set to be confirmed as the new prime minister, is viewed as a policy hawk by the markets, though he has recently softened his stance on monetary policy normalization. Ishiba, who won his party’s leadership in one of the closest races in history, faces the challenge of unifying his party as he prepares for a snap general election on October 27.
The euro remained flat at USD 1.1132, following its decline to USD 1.1113 in the previous session. Slowing inflation in Germany and Italy has reinforced expectations of a rate cut, with ECB President Christine Lagarde stating that “the latest developments strengthen our confidence that inflation will return to target in a timely manner,” ahead of the Oct. 17 policy decision.
The Australian dollar held steady at USD 0.6914, after hitting USD 0.69435 on Monday. Over the weekend, China’s central bank ordered lenders to lower mortgage rates by the end of October, and several major cities, including Guangzhou, Shanghai, and Shenzhen, significantly relaxed home-buying restrictions.
China’s offshore yuan weakened to 7.0116 per dollar, following a 0.36% drop overnight as the prospect of more monetary easing loomed. China’s financial markets are now closed for the Golden Week holiday, which begins Tuesday.
Other News
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Martin Schlegel takes over as Swiss National Bank chairman, focusing on price stability and tougher UBS capital rules amid scrutiny over the Credit Suisse collapse.
Australia’s Central Bank Bans RBC from Briefings After Leak
The Reserve Bank of Australia has barred RBC Capital Markets from private briefings for 12 months after a client leaked information from a closed-door meeting.
ECB’s Lagarde Backs Mergers as UniCredit Eyes Commerzbank
ECB President Christine Lagarde backs mergers to boost European banks’ global competitiveness, as UniCredit seeks a merger with Commerzbank.
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