The USD is little changed with the DXY index down slightly. The change in the USDe rate against EUR, CAD, GBP is below 0.5%. The USD is higher against the AUD (+0.25%) and the NZD (+0.33%) as these currencies continue their lower trend and each has broken below a major floor on their daily schedules (see video from yesterday HERE).
Below is a technical kickstart video looking at the techncals driving the 3 major currency pairs – the EURUSD, USDJPY and GBPUSD.
VIDEO CHOOSING
US stocks are higher after yesterday's fall with the Dow up 157 points (after 9 days of decline). S&P futures mean a gain of 18 points and the Nasdaq is up 66 points.
Yields are higher with eh 2 year up 1.6 bps to 4.257% and the 10 year up 3 bps to 4.416%.
The Fed meets today and announces its interest rate decision at 2pm ET with a 25 basis point cut expected. The focus will be on the dot plot though, and the other projections that will begin new year. For kicks and giggles, below is what the projections for the end of 2024 looked like at this time a year ago:
- For GDP, they saw 1.4%. The GDP has been stronger with 4th quarter GDP expected to be 3.1%.
- For the unemployment rate, they projected 4.1%. It rose to 4.2% at the last report.
- For PCE inflation they predicted 2.4% for the headline and 2.4% for the Base. The latest US PCE inflation rate is 2.3% from October 2024, while the core PCE inflation rate, which excludes food and energy, is 2.8%
- They predicted that the Fed Fund rate would be 4.50% to 4.75%. or 4.60%. The Fed is expected to cut rates to 4.25% to 4.50% or 4.375%
The latest forecasts from September to be reviewed today show:
For September 2025, they see the Fed Funds rate moving down 100 bps in 2025 to 3.4%. That will be the focus today and it is likely to be louder.
Meanwhile, from the ECB today in Europe, the ECB's Wunsch said that the impact of tariffs depends on the reaction of the euro's exchange rate, noting that a weaker euro would reduce the impact on growth but increasing inflation. He said that if the euro reaches parity with the dollar, the loss of competitiveness would be limited. Wunsch expects interest rates to stabilize around 2%suggesting that a four rate cut is a meaningful and comfortable position. Regarding the inflation target, he emphasized that there is no desire to change it 2% goal and pointed out that the role of the ECB is not to deal with political or structural challenges. The focus will be on policy decisions inflation, wages, growth, and PMIalthough he noted that there is no broad consensus on aggressively dealing with inflation below 2%.
US building permits are expected to come in at 1.430 million, with housing starts expected at 1.343 million. The US current account for the Q3 is expected to be $-284.0 billion.
The weekly oil inventory data is expected to show a crude oil inventory drawdown of -1.635 million and gasoline accumulation of 2.060 million.
