Daily Market Commentary 12th September 2024

US inflation dipped to 2.5% p.a., in line with expectations, green-lighting the Fed to begin the rate cut cycle. The subdued inflation rate remains above the target levels but will encourage the Fed to begin the cycle of rate cuts, even considering the market encouraged 50 basis points. The ECB will probably cut interest rates again tomorrow night, as recessionary conditions prevail in the European economic zone, much in need of stimulus. UK economic data disappointed, with GDP growth flat and industrial and manufacturing production, both remaining heavily negative. The EUR slipped back and is now testing 1.1000, to the downside, while the GBP eased to 1.3030.

The US CPI number increased the likelihood of rate cuts in the US, increasing the interest rate differential with Australia, thereby boosting the AUD overnight. The AUD regained 0.6650 and looks set to have further advantage with interest rate differentials, vis-a-vis most of the major cross-rates, while the NZD struggled to hold above 0.6100. Market attention now turns to the ECB and their latest monetary policy decision, later today.