New Zealand dollar continues to mark new year to date lows

Key Movers

There is plenty to digest this morning, but we will lead with the euro and its break toward 1.0450 following the ECB December policy meeting. Policy makers elected to cut rates by 25 basis points, bringing the underlying deposit rate to 3%, while the accompanying rate statement was adjusted, removing any concession to restrictive policy moving forward. Instead, policy makers shifted to a data dependent view, while considering the possibility of a 50-point rate cut. With growth and inflation forecasts revised downward, the market set about pricing in a further 125 points of cuts through 2025. In contrast, markets are pricing fewer cuts from the Fed. Despite softer than expected leading inflation indicators, recent US macro sets have proved remarkably resilient, forcing investors to slow their expectations for monetary policy easing through 2025. While the euro gave up ground, it was not the worst performing major. The Swiss franc led losses, giving up near 1% after the Swiss National Bank elected to issue a 50-point rate cut, 25 points over and above the quarter point expected by the market.

Our attentions turn now to UK GDP numbers and inflation expectations, while German business forecasts, Japan’s Tankan survey, NZ manufacturing PMI’s and migration data round out the macro ticket.