The USD is mixed to start the day with the AUDUSD the biggest mover with a gain of 0.55% (lower USD). The RBA held its cash rate at 3.60 % in its September decision, as expected. The board adopted a cautious stance, citing lingering inflation risk and uncertainty about the economic outlook. Going forward, the RBA will remain data-dependent, explicitly tying any change in November to upcoming inflation, labour market, and broader economic indicators.
RBA Governor Michele Bullock said the board views the risks as broadly balanced: inflation remains within the target range, but recent data suggest slightly stronger-than-expected pressure. She noted the labour market is holding up, and emphasized that policy decisions will be made meeting by meeting, with November’s setting dependent on upcoming data.
On market expectations, Bullock said the RBA is looking at the same data the markets are but will not say whether market pricing is right or wrong. She stressed the RBA has no fixed bias in policy, and that its stance will continue to depend on evolving economic outlook and data.
The comments were viewed as more hawkish sending the AUDUSD higher.
The EURUSD is higher (lower dollar) by 0.12%, the USDJPY is down -0.38% and the GBPUSD is up marginally by 0.04% at the tart of the US session. In the video above I take a technical look at the 3-major currency pairs.
IN other overnight news:
Federal Reserve Vice Chair Philip Jefferson warned that the U.S. labor market is softening and could face stress without adequate support. He noted that slower labor force growth may weigh on potential GDP and widen the output gap. While he expects inflation to resume its downtrend after this year, he acknowledged high uncertainty around the neutral rate and whether policy is currently restrictive or accommodative. He stressed that further labor market weakness is not needed for policy adjustment and that decisions should be made deliberately given the uncertain backdrop.
SNB Chairman Martin Schlegel said that inflation is expected to rise slightly in the coming quarters. He noted that uncertainty remains high and that the SNB is closely monitoring conditions. Economic indicators suggest a stable environment and moderate growth, though downside risks have increased slightly, partly due to U.S. pharmaceutical tariffs. He implied that a change in policy is not imminent, as the current stance is already priced in.
ECB Vice President Luis de Guindos stated that the current level of interest rates is adequate. He emphasized that the ECB will make decisions meeting by meeting rather than following a predetermined path. He also pointed out that many policymakers consider small deviations from the 2 % inflation target alone to be insufficient to trigger policy changes.
In political news, the US is heading toward a shut down at the end of the day. That will impact economic data coming out if there is no solution/extension including the US jobs report on Friday.
The economic data in Europe today showed:
German Import Prices m/m: -0.5% (weaker vs -0.2% expected)
German Retail Sales m/m: -0.2% (weaker vs +0.6% expected)
UK Current Account: -28.9B (weaker vs -24.8B expected)
UK Final GDP q/q: +0.3% (in line with +0.3% expected)
UK Revised Business Investment q/q: -1.1% (stronger vs -4.0% expected)
German Prelim CPI m/m: +0.2% (slightly stronger vs +0.1% expected). YoY was higher at 2.4% vs 2.3%.
French Consumer Spending m/m: +0.1% (weaker vs +0.3% expected)
French Prelim CPI m/m: -1.0% (weaker vs -0.9% expected)
Swiss KOF Economic Barometer: 98.0 (stronger vs 97.1 expected)
German Unemployment Change: +14K (weaker vs +8K expected)
Italian Prelim CPI m/m: -0.2% (weaker vs -0.1% expected)
On the economic and event calendar today:
9:00am ET – US HPI m/m: -0.2% exp (prev -0.2%).
9:00am ET – US S&P/Case-Shiller 20-city HPI y/y: 1.7% exp (prev 2.1%).
9:45am ET – US Chicago PMI: 43.4 exp (prev 41.5).
10:00am ET – US JOLTS job openings: 7.19M exp (prev 7.18M).
10:00am ET – US CB consumer confidence: 96.0 exp (prev 97.4).
11:00am ET – President Trump speaks.
4:30pm ET – API weekly statistical bulletin (oil inventories).
FOMC speakers
9:00am ET – Fed's Collins.
1:30pm ET – Chicago Fed Pres. Goolsbee.
3:30pm ET – Goolsbee again
7:10pm ET – Logan.
US stocks are lower in premarket trading:
- Dow industrial average rose 101 points
- S&P -11 points
- NASDAQ index -32 points
in the US debt market, yields are lower:
- 2-year yield 3.610%, -2.3 basis point
- 5 year yield 3.721%, -1.9 basis points
- 10 year yield 4.130%, -1.0 basis points
- 30 year yield 4.704%, -0.1 basis point
