US CPI came in line with expectations yesterday, with the core monthly gauge coming in at 0.3%, which is also the same as the previous month. The number firmed up the odds of a 25bps cut by the Federal Reserve (Fed) next week. Overall, USD was marginally stronger on the day.
The Bank of Canada cut rates by 50bps, as was widely expected, but the comments after suggested further cuts are not guaranteed and that they will evaluate future cuts one policy meeting at a time. As a result GBPCAD fell, unable to breach previous resistance levels once again.
*Daily move - against G10 rates at 7:30am, 12.12.24
** Indicative rates - interbank rates at 7:30am, 12.12.24
All eyes are on the European Central Bank (ECB) today and whether it cuts rates by 25bps or 50bps. Market pricing has now gradually moved towards a 25bps cut, however back in November markets were pricing the odds of a 50bps cut, weighting up the implications of Trump's tariffs on the eurozone economy. The accompanying forward guidance might not reveal much about the ECB's future rate policy, but if we see a downgrade in the ECB's economic growth outlook, markets may weaken the EUR.
Also today, we have PPI inflation from the US but we expect minimal impact on USD.
AUD soared to the top overnight fuelled by jobs data beating expectations. The unemployment rate came in at 3.9% vs the anticipated 4.2%. Dovish rate pricing has eased slightly, with the base case of a cut in May.
A Reuters article released overnight said that the Bank of Japan could be leaning towards keeping rates on hold next week. As a result, JPY was weakened.
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