NZD steady as all eyes turn to US employment report

Key Movers

The euro and the GBP were the day's biggest movers, reversing Wednesday’s post-CPI data gains amid a fall in core inflation pressures and a subsequent repricing in September rate hike expectations. After Spanish and German inflation printed higher earlier this week there was a fear price pressures will have risen, elevating calls for another 25 basis point European Central Bank (ECB) rate hike. Instead, core inflation fell from 5.5% to 5.3% in the 12 months to August. With ECB policy makers highlighting concern for growth and activity through Q3 and Q4 markets pared back expectations for a rate hike from a 50% chance to a little under a 25% chance. As European yields fell the euro followed suit down 0.7%, sliding back below US$1.0850. The pound followed suit after Bank of England Chief Economist Huw Pill suggested the MPC was nearing the end of its tightening cycle saying a lot of the previous rate hikes are yet to impact the UK economy. With the Bank of England expected to lift rates to 5.5% this month markets are beginning to price in expectations for a loosening in policy controls through 2024. With growth concerns beginning to outweigh inflation fears the pound could welcome under pressure leading into the end of the year.
Our attention now turns to US non-farm payroll data, Canadian GDP, China’s Ciaxin Manufacturing index and a US ISM manufacturing survey as markers driving direction into the weekly close.