US equity markets came off recent highs, nervous prior to the last Fed rate decision, for 2025. The Fed is expected to cut rates by 25 basis points, encouraged by a cooler than anticipated PCE Inflation Report, and a testing labour market. Failure to act in line with market expectations would be a shock to equity markets. The US Dollar remained steady, with bond yields creeping up in Asia, Europe and the US markets. The EUR held above 1.1600, while the GBP trades above 1.3300.Chinese trade data was stronger than expected, but the Asian problems are centred around Japan. Japan bond yields have been rising to record levels, reversing the Yen ‘carry trade’, while economic data craters. Japanese GDP contracted 2.3% annually, at the end of Q3, while pressure is on the Bank of Japan, to raise rates as inflation builds. Todays RBA decision is expected to be a hold, as fiscal imbalance continues to drive inflationary pressures, constricting the Central Bank. This supports the AUD, which has regained 0.6600, while the NZD tops 0.5750.
