Daily Market Commentary 20th September 2024

The Bank of England left rates unchanged, at 5%, holding at the rate at the level the Fed has just cut rates to. The big 50-point rate cut by the Fed, signalled intent and they also outlined an aggressive policy of rate cuts, for the foreseeable future. This was greeted with a huge surge in sentiment, triggering a big rally in US equities, to all new record highs. Markets are now betting there will be a soft economic landing in the US, allowing market confidence to surge. The US Dollar was steady, with the EUR trading just below 1.1200, while the GBP approaches 1.3300. The Bank of England acted cautiously, indicating further rate cuts were on the way, noting inflation remains at elevated levels. Markets now turn their attention to the Bank of Japan and the Peoples Bank of China. The Bank of Japan may address rising inflationary pressures, bucking the global trend, by raising interest rates.
 
The static reserve allowed commodity currencies to consolidate, with the AUD holding above 0.6800, while the NZD looks to regain 0.6250. NZ Q2 GDP contracted 0.2%, which was better than expected, but never-the-less reflective of the current state of the economy. The RBNZ have already begun the easing cycle, and this should flow through to the economy, although tough conditions remain. Australian headline employment was steady on 4.2%, although all job growth was part-time, while full-time jobs actually contracted. All eyes are now on the BoJ and the PBoC.