Daily Digest Market Movers: Australian Dollar rises against US Dollar on central banks’ policy divergence
- US Treasury Secretary Janet Yellen stated on Friday that the recent interest rate cut by the Federal Reserve is a very positive indicator for the US economy. According to Yellen, it demonstrates the Fed's confidence that inflation has significantly decreased and is moving toward the 2% target. Meanwhile, the job market continues to show strength.
- Australian Employment Change came in at 47.5K in August, down from 58.2K in July, but well above the consensus forecast of 25.0K. The Unemployment Rate remained steady at 4.2% in August, in line with both expectations and the previous month's figure, according to data released by the Australian Bureau of Statistics (ABS).
- The Federal Open Market Committee (FOMC) lowered the federal funds rate to a range of 4.75% to 5.0%, marking the Fed’s first rate cut in over four years. This move signals the Fed’s commitment to safeguarding the labor market and steering the economy away from any signs of recession.
- Fed policymakers updated their quarterly economic forecasts, increasing the median projection for unemployment to 4.4% by the end of 2024, up from the 4% estimate made in June. They also raised their long-term forecast for the federal funds rate from 2.8% to 2.9%.
- Economists at Goldman Sachs and Citi have lowered their 2024 GDP growth forecasts for China to 4.7%, below Beijing's target of approximately 5.0%. SocGen describes the scenario as a "downward spiral," while Barclays refers to it as "from bad to worse" and a "vicious cycle." Morgan Stanley has also warned that "things could get worse before they get better," according to a Reuters report.
- China's economy showed signs of weakness in August, characterized by a continued slowdown in industrial activity and falling real estate prices. This situation has prompted increasing pressure on Beijing to enhance spending to stimulate demand, as reported by the National Bureau of Statistics on Saturday, according to Business Standard.
- Reserve Bank of Australia (RBA) Governor Michele Bullock emphasized that it is premature to consider rate cuts given the persistently high inflation. Additionally, RBA Assistant Governor Sarah Hunter noted that while the labor market remains tight, wage growth seems to have peaked and is expected to slow further.
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