December 10, 2024

“Today will likely see markets building up to some key central bank decisions and US inflation prints. We have seen a lot of volatility in the Australian and New Zealand dollars early on in the week, amid announcements from China and the RBA’s more dovish stance.”

Sam Cornford – Head of Trading

USD

The dollar index moved marginally higher yesterday as traders await some direction from tomorrow’s inflation print and Thursday’s ECB decision. The most significant volatility has come from AUD/USD, which rose 0.75% following China’s promise to motivate domestic consumption yesterday and has now fallen nearly 0.9% this morning after the RBA softened its stance and kept the door open to a rate cut as soon as February. The sentiment boost from this latest pledge out of China only extended to the yuan’s proxies (e.g. AUD, NZD) and the equity markets rather than the domestic currency or the euro, however. In the US, the New York Fed’s survey of one-year inflation expectations inched higher from 2.9% to 3.0% yesterday, likely reflecting the impact of the recent data and Trump’s election victory. On the calendar today is NFIB small business optimism, where the consensus is for a slightly improved figure for November.

GBP

UK-EU trade ties were a hot topic for sterling on Monday, as Rachel Reeves announced that talks will begin on ‘resetting’ the relationship in 2025. GBP/EUR has crept towards to the high end of the post-Brexit trading band this year, and the hope for pound bulls will be that a closer relationship could begin to unwind some of the ‘Brexit premium’ that has kept sterling subdued since 2016. It ended the session modestly higher, and the focus now will be on US inflation, the ECB decision, and a British GDP print on Friday morning.

EUR

Today is a waiting game ahead of Thursday’s ECB decision for the euro. With this week’s catalysts only arriving tomorrow, there is a calm feeling in markets. This morning, a final estimate for German CPI held steady at 2.2% and policymakers are in a pre-meeting blackout. That said, there may be some headlines from the final day of the Eurogroup meetings or from France, where Macron is looking to install a new government as quickly as possible. Ultimately, however, traders want to see what Christine Lagarde says in the press conference. Elsewhere in Europe, the Norwegian krone is the best performer in the G10 this morning after underlying inflation broke its disinflationary streak in rising to 3.0%, supporting the Norges Bank’s hawkish stance.

Markets

While US stocks were dragged lower ahead of this week’s inflation data, indices in China and Europe were lifted by a boost to sentiment after the Chinese authorities loosened their monetary policy stance for the first time in 10 years and indicated a willingness to boost domestic consumption. The EuroStoxx 600 is on an eight-day winning streak, China’s CSI 300 rose by 0.7%, and many commodities moved higher.

Main Economic Events (All Times CET)

4:30am: Reserve Bank of Australia Rate Decision
8:00am: Norway CPI Inflation
12:00pm: US NFIB Small Business Index

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