Morning Market Review for 09.10.2024

EUR/USD

The EUR/USD pair is showing a moderate decline after attempts at corrective growth at the beginning of the week. The instrument is testing 1.0960 for a breakdown, again approaching the local lows of August 15. The macroeconomic statistics from the eurozone published the day before did not provide significant support to the quotes: Industrial Production in Germany in August increased by 2.9% after –2.4% in the previous month, while analysts expected 0.8%, and in annual terms they fell by 2.7% after –5.3%. Separately, investors paid attention to the deterioration of France's foreign trade indicators: Exports slowed down from 48.466 billion euros to 49.657 billion euros, while Imports, on the contrary, increased from 55.508 billion euros to 57.028 billion euros, which led to a correction of the Trade Balance deficit from –6.064 billion euros to –7.371 billion euros with a forecast of –5.500 billion euros. In turn, the positions of the American currency received support the day before from macroeconomic statistics from the United States: the Economic Optimism Index from IBD/TIPP strengthened in October from 46.1 points to 46.9 points, with expectations of 47.2 points. Today at 20:00 (GMT+2), investors will focus on the publication of the minutes of the September meeting of the US Federal Reserve, at which the interest rate was reduced by 50 basis points at once. Officials are likely to confirm their intention to continue to reduce borrowing costs, but at a more moderate pace.

GBP/USD

The GBP/USD pair is trading with downward dynamics, again preparing to test 1.3080 for a breakdown. Market activity remains subdued as investors await new drivers of movement, which could include, among other things, the minutes of the US Federal Reserve meeting, which will be published today at 20:00 (GMT+2). Earlier, the Chair of the regulator, Jerome Powell, had spoken about the prospects for monetary policy and called for considering a more gradual reduction in the cost of borrowing in the future, after which the markets revised their forecasts for the November meeting of the Fed and now, with a probability of more than 90.0%, they expect an adjustment in the interest rate by only –25 basis points, according to the Chicago Mercantile Exchange (CME Group) FedWatch Tool. The inflation data due out tomorrow at 14:30 (GMT+2) seems a bit of a secondary story at the moment, but any significant deviations in the dynamics could impact the Fed's decisions. In any case, analysts expect the Consumer Price Index to slow down in annual terms from 2.5% to 2.3% in September, and in monthly terms from 0.2% to 0.1%. At the same time, the Core CPI excluding Food and Energy is likely to remain at 3.2% year-on-year and will be adjusted from 0.3% to 0.2% month-on-month. Also on Thursday, data on jobless claims will be presented: experts expect an increase in Initial Jobless Claims for the week ended October 4 from 225.0 thousand to 230.0 thousand. Tomorrow, the UK will release an inflation report that could shed light on the prospects for further interest rate cuts by the Bank of England. At the moment, the pound is being moderately supported by the data on the dynamics of Retail Sales from the British Retail Consortium (BRC), which entered the market the day before: thanks to an increase in demand for non-food products, the indicator increased by 1.7% year-on-year, with expectations of 0.8%.

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Publication date:

09 October 2024 - 12:35 (GMT)

The AUD/USD pair is showing a noticeable corrective growth, retreating from its local lows of September 16, updated the day before. The instrument is testing 0.6750 for a breakout, while trading participants expect the emergence of new movement drivers. Among other things, today at 20:00 (GMT+2) the minutes of the September meeting of the US Federal Reserve will be published. The regulator announced a 50-basis-point rate cut, but later the Chair of the Fed, Jerome Powell, spoke out against easing monetary policy at such a high pace, against which the markets adjusted their expectations regarding a reduction in borrowing costs by the end of this year, but still expect one or two reductions in the value by the end of the year from the current 5.00%. Meanwhile, the position of the Reserve Bank of Australia (RBA) remains ambiguous: the minutes of the September meeting presented yesterday did not contain any hints of easing the parameters and only reflected previous theses about the need for an appropriate response to macroeconomic data. At the same time, officials are counting on a noticeable improvement in the domestic economic situation next year, which will allow them to implement their planned reduction of the interest rate to the target level of 2.0%. The macroeconomic statistics released the day before provided some support to the instrument: the National Australia Bank's business confidence index increased from –5.0 points to –2.0 points in September, the Business Conditions index rose from 3.0 points to 7.0 points, and the Westpac Consumer Confidence index accelerated sharply by 6.2% in October after –0.5% in the previous month.

The USD/JPY pair is showing weak growth, recovering from some decline at the beginning of the week, which did not allow the instrument to consolidate at new local highs from August 16. Quotes are testing 148.50 for a breakout, while traders are awaiting the publication of the minutes of the September meeting of the US Federal Reserve at 20:00 (GMT+2). At the same time, earlier the Chair of the regulator Jerome Powell had already spoken out regarding the prospects of monetary policy, speaking out against further reduction of the interest rate at a high pace and insisting on a gradual adjustment of the value by –25 basis points. Against this backdrop, investors have revised their forecasts for the November meeting and now, according to the Chicago Mercantile Exchange (CME Group) FedWatch Tool, the probability of a 25-basis-point reduction in borrowing costs is more than 90.0%. The US macroeconomic statistics published the day before turned out to be cautiously optimistic: the business optimism index from the National Federation of Independent Business (NFIB) rose from 91.2 points to 91.5 points in September, while analysts expected 91.7 points, and the economic optimism index from IBD/TIPP in October demonstrated growth from 46.1 points to 46.9 points with a forecast of 47.2 points. Meanwhile, data from Japan showed Labor Cash Earnings slowing in August from 3.4% to 3.0%, compared with expectations for 3.1%. The decline in wage dynamics may indirectly indicate a weakening of inflation risks within the country, which negatively affects expectations of further tightening of monetary policy by the Bank of Japan. The Eco Watchers Current Situation Index fell from 49.0 points to 47.8 points in September, while the Outlook fell from 50.3 points to 49.7 points.

The XAU/USD pair is consolidating near 2620.00 during the morning session, awaiting the publication of the minutes of the US Federal Reserve's September meeting, which may clarify the outlook for further monetary easing. Earlier, the Chair of the regulator, Jerome Powell, spoke out against a rapid reduction in the interest rate by 50 basis points. According to the Chicago Mercantile Exchange (CME Group) FedWatch Tool, the probability of a 25-basis-point correction at the November meeting briefly jumped above 90.0% and is currently around 87.0%. Tomorrow, the US will release inflation data, which could also influence further decisions by officials. At the same time, forecasts suggest that core annual inflation will remain unchanged at 3.2%, while the CPI is likely to decline from 2.5% to 2.3%. Meanwhile, demand for gold continues to increase amid geopolitical tensions in the Middle East, where the threat of an expansion of the theatre of military operations remains. Markets are also preparing for the November US presidential elections, the results of which could significantly impact various aspects of the country's domestic and foreign policy.