European FX Open - USD takes -50BPs Fed rate cut in stride for now

USD/YEN opens materially firmer.

Otherwise, G10 FX has been relatively steady after the decision by the Fed to begin its easing cycle with the more aggressive -50BPs rate cut. Expectations ahead were slightly in favour of a smaller -25BPs move.

Fed chief Powell said starting with a big move while the US economy is still strong would help limit the chances of a downturn. He didn’t commit to a similar pace of easing going forward, saying future moves would be based on how the economy performs.

US stock futures all stand firmly in the green in the wake of the move, led by the +1.4% NASDAQ, as markets for now at least seem to agree with the Fed that a soft landing can be achieved.

Powell cited the labour market as being in a solid condition and rejected any criticism that the Fed is behind the curve in terms of the timing of a first move.

As well as the coin toss verdict, markets had been expecting the first Fed rate cut to coincide with further USD downside. Give it a chance! That could yet pan out, but for now ranges remain very much intact.

To some extent, in terms of the broader USD, markets will stay data dependent in assessing the timing and aggressiveness of future rate moves. Today, initial claims, the Philly Fed and US housing data lead.

Moving swiftly on too and today's two central bank verdicts.

Two of the perceived least dovish G10 central banks the Norges Bank and the BOE are widely tipped to leave their interest rates at 4.50% and 5.00% respectively. For the latter, central bank governor Bailey could offer some clues on the likelihood of a second easing in November, but is unlikely to suggest a faster pace of easing is needed.

There is multi ECB speak scheduled too.

Elsewhere, AUD/USD is higher towards 0.6800 after a big beat in Australia's jobs report for August, with the employment change coming in at 47.5k vs a 26.0k consensus. With the unemployment rate holding at 4.2%, this underscores the resilience of the labor market despite elevated RBA rates.

And in NZ, Q2 GDP was not quite as soft as forecast, at -0.2% q/q and -0.5% y/y vs revised 0.1% and 0.5% numbers the previous quarter.

Meanwhile, oil is steady just below Usd 74/brl post-FOMC even after the fresh explosions were reported in Lebanon. BBC News report Lebanon is on edge after thousands of electronic devices exploded across two days. Israel has not commented on the blasts, but yesterday, Israel's Defence Minister Yoav Gallant announced 'a new phase in the war' as a division of Israel's military has relocated from Gaza to the north. Hezbollah leader Hassan Nasrallah is due to give a televised speech later.

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