Market expectations for a 50 basis point cut by the Fed grow to 50/50 amid debate over whether the US jobs market is too weak for just a 25 bps move. The Yen hits its strongest level against the US dollar since mid-2023.
In our bonus deep dive interview, ANZ’s Chief Economist for Greater China, Raymond Yeung sees the potential for China to unveil a two trillion yuan stimulus package.
5 things to know:
Market expectations are growing that the US Federal Reserve could kick off its rate cutting cycle with a 50 basis point cut on Thursday, says ANZ Head of G3 Economics Brian Martin.
ANZ Senior International Economist Tom Kenny explains why ANZ Research sees a 25 bps cut as more likely.
Tom says one reason some see a 50 basis point cut is the so-called Sahm rule has been triggered. This is where there tends to be a recession in the US whenever the unemployment rate moves 50 basis points above its 12-month low. Tom thinks this time might be different.
One big mover on currency markets in recent days has been the dollar yen. ANZ Head of FX Research Mahjabeen Zaman says it’s driven by expectations of the Fed cutting on one side and the Bank of Japan raising rates on the other.
One key US data point ahead of the Fed’s meeting is August retail sales numbers due tonight. Tom says some softness is expected. The consensus forecast is for a month-on-month fall of 0.2%.
Cheers
Bernard
PS: Catch you tomorrow with more on what the US Federal Open Markets Committee looks set to do with interest rates this week.
