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US Fed Cuts Rates As Expected | NZD Edges Higher

Published October 31, 2019

The US Federal Reserve cut interest rates by 0.25% as expected this morning. Market movements were fairly limited on the back of the announcement although the Kiwi Dollar has since made some ground this morning. The worse performing major currency overnight has been the Canadian Dollar. The Bank of Canada kept its cash rate steady at 1.75% as expected last night, but surprised markets by signalling an easing bias going forward.

Fed Cuts Rates

No surprise as the US Fed cut interest rates by 25bps this morning. Of most interest to markets was the Fed indicating that it may pause rate cuts from here, as it made a subtle change to some wording in the accompanying statement, suggesting they were perhaps comfortable at current levels for the time being. Fed Chair Jerome Powel was even clearer in a news conference shortly after saying central bank officials ‘see the current stance of monetary policy as likely to remain appropriate’.

US GDP Beats Expectations

Prior to the Fed rate decision we has US GDP data released, which beat market expectations, coming in at an annualized rate of 1.9% in Q3 vs 1.6% expected. There was also a slightly better than expected rise in the ADP employment index earlier in the day.

Little Reaction to Australian Inflation

Yesterday’s Australian Q3 CPI numbers came in bang on expectations at 1.7%. The number is still well below the RBA’s 2-3% target range, however the market is still not expecting an interest rate cut in November. The data had little impact on the AUD yesterday with markets more interested in the Fed Decision the next morning.

UK Set For Election

The British Pound has remained fairly stable as MP’s backed Boris Johnson’s call for an election, with the UK set to go to the polls on December 12th.