The DXY Index opened for the day at 100.97. EU and UK PMI data, as well as China stimulus announcements, moved the index slightly higher.
On Monday Fed officials commented that current rates are still a major influence on the US economy. Chicago Fed President Austan Goolsbee stated, “Over the next 12 months, we have a long way to come down to get the interest rate to something like neutral.” General consensus was that incoming data will guide their decision making over a 25 or 50bps cut at their next meeting.
Lower than expected PMI data and remarks by ECB President show that the Eurozone will likely have faster rate cuts in the coming months.
Yesterday France and Germany Composite PMI data came in worse than expected.
Prior France Composite PMI was 53.1, compared to 51.5 estimate and 47.4 actual. Weakness came from France Services PMI, shifting from 55.0 prior to 48.3 actual.
Prior Germany Composite PMI was 48.4, compared to 48.2 estimate and 47.2 actual. Weakness came from Germany Manufacturing PMI, moving from 42.4 prior to 40.3 actual.
A speech given by ECB President Christine Lagarde reveals that there is an exchange of views but lack of coordination between her and Fed Chair Jerome Powell. Additionally, she stated “my target is 2%, I want to get to 2%” in regards to inflation rates.
Yesterday UK PMI survey data was released, coming in slightly worse than expected. Prior Composite PMI was 53.8, compared to 53.5 estimate and 52.9 actual. Weakness in part came from UK Services PMI, moving from 53.7 prior to 52.8 actual.
Although data was lower than estimated, UK PMI data came out better than EU results and is still above the 50.0 level that indicates an increase in activity.
Labour Party Conference is well underway this week, with highlights including a heckler during Deputy PM Angela Rayner’s speech. Today PM Starmer will give an address that will focus on qualified, long-term optimism. With promises to crack down on benefit frauders and reduce NHS waiting list times, the conference will reveal Labour’s path for the UK during the next few years.
World News
USDJPY rose 0.4% to 144.16 following a number of stimulus announcements from China, boosting risk sentiment and lowering demand for the haven currency. This rally in risk assets will likely be short lived as China’s economy is worsening and deeper rate cuts will likely occur.
RBA interest rates stayed at 4.35%, coming in line with expectations. Struggles to subdue stubborn price pressures are preventing them from joining the global easing cycle, leaving them holding rates at a 12-year high.
