European inflation data confirmed the return to falling inflationary pressures inside the Eurozone. Flash CPI numbers from both Germany and France confirmed that the downward spiral of inflation resumed, with large falls. Recession in both Germany and France are the best anecdote for inflation, at a cost, but now the likelihood of ECB rate cuts rise considerably. US Markets await the Fed’s latest decision, which is expected to be to leave rates unchanged, but the commentary will be important for market direction. The ADP Jobs report was weaker than expected, showing labour market conditions are softer, which is also a green light for future Fed rate cuts. Bond Yields fell across Europe and the US, while the EUR traded 1.0840, the GBP regained 1.2700, ahead of the Bank of England rate decision.
Australian inflation tumbled, crashing to 4.1% in Q4 from 5.4% in Q3, removing fears of a resurgence. This will be good news for the RBA, as they consider when they will begin to cut rates and ease monetary policy. The AUD remained weak, trading below 0.6600, while the NZD consolidated above 0.6100. The NZD received a boost from the RBNZ Chief Economist, who considers rates should remain at these high levels, while Business Confidence data reflected improving sentiment. All eyes are on the Fed, followed by the Bank of England, then turn to the US Non-Farm Payrolls.
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