The Markets Expect Interest Rate Cut By The US Fed In August

. 2 min read

The AUDUSD opens at 0.6961 and the NZDUSD opens at 0.6617 - both open higher this morning.

The AUDUSD traded higher yesterday after Reserve Bank of Australia Governor Philip Lowe said there are limits to what monetary easing can achieve (diminishing margin returns). In addition, he mentioned the recent RBA rate cut would not be enough to revive economic growth and suggested the Government should increase infrastructure spending to stimulate the economy.

The USD lost ground overnight as the interest rate markets moved to fully price in a 0.25% rate cut by the US Fed on 1st August (local time time), with a high probability of two follow-up cuts after that. This helped to push the AUDUSD to 2-week highs and the NZDUSD to 3-week highs.

US President Donald Trump announced they will impose new sanctions on Iran in response to the shooting down of an unmanned US drone.

The EURUSD traded to a 3-month high even as data showed that a slump in German business confidence deepened in June.

The GBPUSD touched a 1-month high overnight in relatively subdued trading, the markets await confirmation on the new British Prime Minister – Eurosceptic Boris Johnson being the front-runner.

There is no data on the domestic economic calendar today.

Global equity markets were mixed on the day - Dow +0.1%, S&P 500 -0.1%, FTSE +0.1%, DAX -0.5%, CAC -0.1%, Nikkei +0.1%, Shanghai +0.2%.

Gold prices jumped 1.4% to USD$1,418 an ounce, a level last seen in 2013, on safe-haven demand. WTI Crude Oil prices gained 0.4% toUS$57.85 per barrel. The new Iran sanctions news fuelled demand for commodities.

Upcoming Data Releases

  • NZD: Trade Balance (May) - 8:45 AEST / 10:45 NZST
  • JPY - Bank of Japan Monetary Policy Meeting Minutes - 9:50 AEST/ 11:50 NZST
  • Tonight - OPEC meeting begins
  • Overnight - US Fed Chairman Powell speaks on the economic outlook and monetary policy

Mid-Market Rates

AUDUSD 0.6961 0.4% NZDUSD 0.6617 0.4%
AUDEUR 0.6107 0.1% NZDEUR 0.5805 0.2%
AUDGBP 0.5465 0.4% NZDGBP 0.5193 0.3%
AUDJPY 74.69 0.4% NZDJPY 70.99 0.4%
AUDNZD 1.0521 0.0% NZDAUD 0.9505 0.0%
GBPAUD 1.2980 -0.4% NZDCAD 0.8720 0.1%
      GBPNZD 1.9257 -0.3%

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