Markets closed out a ‘topsy turvey’ week, as equities and bonds oscillated, while the US Dollar recovered some favour. The Federal Reserve cut rates, but hinted at a pause in the rate cutting cycle, to tame a spike in inflation. The Fed is controlled by a very political group of Governors and lead by the ‘too late Powell’, who seems intent of holding rates at elevated levels until his term expires early 2026. We will see a Trump nominated Fed Chairman, who will ensure drastic rate cuts, which should stimulate investment. The US Dollar regained some mojo, with the EUR heading back towards 1.1500, while the GBP slumped to 1.3130.
The resurgent reserve has reversed gains in commodity currencies, with the AUD sliding back to 0.6550, while the NZD crashed back towards 0.5700. This coming week will focus on US labour markets, although the Government shut down, will interrupt official data. The RBA will make their annual Melbourne Cup interest rate decision, likely to be a hold, as inflation has spiked recently.
