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Currencies remained in limbo into Thursday’s economic data announcements.

The Federal Reserve dropped their cash rate for the third time in 2019 from 2.0% to 1.75% and downgraded market expectations of further rate cuts for now. Fed officials removed recent rhetoric from June, July and September’s meeting changing- they would “act as appropriate” for something more subtle. The statement said “The committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path”. Eight of the ten officials voted in favour of cutting the rate by 25 points but two disapproved preferring to hold rates unchanged. The Fed statement also noted that business investment and exports remained weak while household spending had increased. In summary Powell’s opening statement sums up the situation well “we believe monetary policy is in a good place, cutting to provide insurance against ongoing risks”- rates could remain steady for some time!? 

Chile have cancelled staging November’s APEC meeting in Santiago overnight after protests against inequality turned to violence. They have also cancelled a United Nations climate change conference planned for early December. This dampens any hopes of achieving a result in “phase one” of the trade agreement between China and the US where the two countries were to due to hopefully sign something at the event. We wait now to hear when leaders will meet again.      

Markets dialled back expectations of a 25 point cut for the November 13 RBNZ meeting overnight as the assistant governor Christian Hawkesby made comment that he has anticipated a total of 60 points would be cut over the next 12 months- this was achieved in the August meeting when the RBNZ cut 50 basis points to 1.0%. The RBNZ will continue to watch incoming data but given third quarter CPI (16th October) surprised to the upside and the Business Confidence index showed improvement at -42.4 we see a good argument for the RBNZ to keep rates on hold. 

Australia’s third quarter improved CPI and Building Approval m/m figures have also potentially pushed back any expectations of the RBA cutting rates at next week’s policy meeting. Third quarter inflation was bang on expectations but has nudged up the Aussie Dollar across the board. Positivity around evading a bad result buoyed fresh interest in the currency with it rallying higher against the greenback. Opinion still remains split on whether there will be a cut in December or early 2020

The Bank of Canada (BoC) left the cash rate unchanged at 1.75% Thursday morning going against the grain of other central banks who are easing. In the statement by the BoC they said the global economy has weakened further since the Bank’s July policy meeting, citing ongoing trade conflicts and uncertainty which have affected business investment and global growth. The Central bank plan to monitor the global slowdown and its effects on spending, housing activity and fiscal policy. The Canadian economy is expected to slow in the second half of this year before modestly improving in 2020 through 2021.

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