Fed Rate Cut Hopes and Several Economic Data Releases – Currency Thoughts
Fed Rate Cut Hopes and Several Economic Data Releases
December 4, 2024
By a three to one margin, financial markets anticipate a 25-basis point interest rate cut from the Fed later this month, compared to a minority view that officials may choose not to ease at this time.
Several U.S. data releases occurred this Friday:
- ADP estimates that 146k private-sector jobs were created in November, which is lower than the net gains in the three previous months.
- Mortgage applications rose in each full week of November. The 30-year fixed mortgage rate dropped to a 6-week low of 6.69% last week.
- U.S. factory orders only rose 0.2% in October following drops of 0.8% in August and 0.2% in September. In January-October, orders were a mere 0.4% above the ten-month average a year earlier.
- The ISM-compiled non-manufacturing purchasing managers index settled back to a 3-month low of 52.1 in November from 56.0 in October, signaling a considerably slower but still upward-sloping rate of service sector activity growth.
- The S&P Global composite PMI index printed at 31-month high of 54.9 last month even though such was 1.4 points below a preliminary estimate.
Investors eagerly await comments from Fed Chairman Powell early this afternoon. He’s in New York participating in a NYT DealBook conference discussion group. The Federal Reserve will also be releasing its Beige Book summary of U.S. regional economic conditions later today.
In financial market action overnight, the dollar slid 0.3% against the Swiss franc and Chinese yuan and by 0.2% relative to sterling and the euro but also rose 0.8% and 0.4% relative to the Australian and New Zealand currencies.
Ahead of tomorrow’s monthly OPEC meeting, WTI oil’s price is 0.2% softer. Gold has firmed 0.5%, while Bitcoin’s price is 0.8% softer.
U.S. and continental European stock exchanges have traded higher, whereas markets in the Pacific Rim experienced diverse results this Wednesday including drops in New Zealand, Australia, South Korea and China but gains of 1.0% gain in Taiwan, 1.8% in Indonesia and 0.1% in Japan.
The 10-year U.S. Treasury yields dropped six basis points.
Producer prices in the euro area rose 0.4% on month but fell 3.2% on year in October.
Euroland’s composite services and manufacturing purchasing managers index for November fell to a 10-month low of 48.3 but also included a second straight acceleration of inflation that evoked the S-word of economists — stagflation. Demand was broadly weak, and the well-established recession in manufacturing appears to be infecting service sector activity whose PMI printed at a 10-month low of 49.5. Among the three largest users of the euro (Germany, France and Italy), composite PMI scores ranged from 45.9 to 47.7.
Japan’s composite PMI reading in November was revised upward to match October’s 2-month high of 50.2, indicating very lackluster growth.
Australia’s composite PMI score was also 50.2. Separately, GDP in Australia posted the smallest year-on-year growth in fifteen quarters during 3Q 2024, just 0.8%.
Despite a 2-month low in China’s service sector PMI of 50.5, its composite PMI reading of 52.3 was the best reading in five months.
India’s composite PMI fell 0.5 points but, at 58.6, conveyed much more dynamism than China’s survey.
The Swedish composite PMI fell 1.4 points to a 2-month low of 51.7.
Despite disruptions from its war with Ukraine, Russian composite and service-sector purchasing manager indices for November printed at an 8-month high of 52.6 and a 10-month high of 53.2. Once again, economic sanctions have proven to be a largely ineffective weapon against geopolitical transgressions.
The British composite PMI index fell to a 13-month low of 50.5. Services also printed at a 13-month low (50.8).
Canada’s composite PMI of 51.5 was the best reading in 30 months, while Brazil’s index dropped to a 3-month low of 53.5.
Manufacturing PMI scores from Singapore of 53.9 and Hong Kong of 51.2 were their lowest in 7 and 2 months, while Lebanon’s index rebounded from a 44-month low of 45.0 in October to a 4-month high of 48.1.
Canadian productivity fell for a third straight quarter, this time by 0.4% between 2Q and 3Q.
The National Bank of Poland’s policy interest rate was maintained unchanged at 5.75% by monetary officials this month. Cuts in August and October had totaled a full percentage point. The rate previously had been at 6.75% from September 2022 through August 2024. Polish CPI inflation has receded from 18.4% in February 2023 to 4.6% last month, but that’s still above the 1.5-3.5% target range.
Namibia’s central bank interest rate was cut 25 basis points today to 7.0%. Namibian CPI inflation has fallen to a 48-month low of 3.0%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland producer price inflation, National Bank of Poland, Service sector PMIs, U.S. factory orders and ADP estimate of employment growth
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