RBNZ Rate Cut: The Countdown Begins
Monday, November 25, 2024 (Week 48)
With key inflation data surprising to the upside and central banks reconsidering their rate cut trajectories, this week's analysis focuses on monetary policy divergence and shifting fundamental strengths.
USD (unchanged) - STRONG
Critical Event: Core PCE (Wed Nov 27, 2 days)
Fundamental Support: PMI Services 57.0, Manufacturing 48.8
Key Risk: Fed minutes could moderate hawkish stance
CHF (↑1) - STRONG
Critical Event: KOF Indicators (Thu Nov 28, 3 days)
Fundamental Support: CPI 0.6%, stable financial sector
Key Risk: Potential SNB intervention
JPY (↓1) - MODERATELY STRONG
Critical Event: Tokyo CPI (Thu Nov 28, 3 days)
Fundamental Support: Core CPI 2.3%, improving PMIs
Key Risk: Intervention threats becoming concrete
EUR (↑3) - NEUTRAL
Critical Event: ECB Minutes (Thu Nov 28, 3 days)
Fundamental Support: GDP growth 0.4% QoQ
Key Risk: German political uncertainty
GBP (↑1) - NEUTRAL
Critical Event: BOE Hearing (Tue Nov 26, 1 days)
Fundamental Support: CPI 2.3%
Key Risk: Fiscal policy uncertainty
AUD (↓2) - MODERATELY WEAK
Critical Event: Retail Sales (Thu Nov 28, 3 days)
Fundamental Support: Employment stable at 4.1%
Key Risk: China slowdown impact
CAD (↓2) - WEAK
Critical Event: GDP Data (Fri Nov 29, 4 days)
Fundamental Support: CPI at 2.0%
Key Risk: BOC dovish bias intensifying
NZD (unchanged) - VERY WEAK
Critical Event: RBNZ Meeting (Wed Nov 27, 2 days)
Fundamental Support: None significant
Key Risk: Potential 75bp rate cut
Rank 1: USD - RESILIENT AMIDST GLOBAL UNCERTAINTY
Fundamental Strength: Exceptional
Retail sales: +0.4% MoM
Unemployment: Steady at 4.1%
Services PMI: Strong at 57.0
Manufacturing PMI: Weak but improving at 48.8
Market Psychology:
Dominant Theme: Trump policy expectations driving inflation concerns
Secondary Theme: Strong corporate earnings (80% beats)
Forecasts:
Dollar Index: 105.46 (Q4 2024)
Treasury Yields: 4.38%
S&P 500: 5,836.62
Trading Sentiment:
COT Positioning: Heavy net long positions
Key Levels: Support at 105.50, Resistance at 107.50
Tactical Opportunity: Consider profit-taking ahead of Fed minutes
Rank 2: CHF - SAFE-HAVEN APPEAL STRENGTHENS
Fundamental Strength: Strong
Inflation: 0.6% YoY, lowest since June 2021
Trade Balance: Stable surplus
Financial Sector: Robust capital ratios
Market Psychology:
Dominant Theme: Safe-haven flows amid geopolitical tensions
Secondary Theme: SNB's effective currency management
Forecasts:
USD/CHF: 0.88 (Q4 2024)
SMI: 11,895.84
10Y Yield: 0.36%
Trading Sentiment:
COT Positioning: Dealers net long, Asset Managers heavily net short
Key Levels: Support at 0.8800, Resistance at 0.8950
Tactical Opportunity: Buy on dips toward 0.8800
Rank 3: JPY - INTERVENTION RISK MAINTAINS SUPPORT
Fundamental Strength: Moderately Strong
Core CPI: 2.3% YoY
Manufacturing PMI: 49.0
Services PMI: 50.2
Industrial Production: +1.4% MoM
Market Psychology:
Dominant Theme: Intervention risk after official warnings
Secondary Theme: BOJ policy normalisation expectations
Forecasts:
USD/JPY: 155.48 (Q4 2024)
Nikkei 225: 38,923.13
10Y JGB Yield: 0.95%
Trading Sentiment:
COT Positioning: Leveraged funds significantly net short
Key Levels: Support at 154.00, Resistance at 156.00
Tactical Opportunity: Reduce short exposure ahead of Tokyo CPI
Rank 4: EUR - BOUNCING FROM OVERSOLD LEVELS
Fundamental Strength: Neutral
GDP Growth: 0.4% QoQ, exceeding expectations
Inflation: 2.0% YoY
Composite PMI: 48.1, indicating contraction
Unemployment: Stable at 6.3%
Market Psychology:
Dominant Theme: German political uncertainty
Secondary Theme: ECB rate cut expectations
Forecasts:
EUR/USD: 1.07 (Q4 2024)
STOXX 50: 4,843.70
German 10Y Yield: 2.35%
Trading Sentiment:
COT Positioning: Asset managers heavily net long
Key Levels: Support at 1.0500, Resistance at 1.0700
Tactical Opportunity: Consider long positions near 1.0500
Rank 5: GBP - FINDING TEMPORARY STABILITY
Fundamental Strength: Neutral
Inflation: 2.3% YoY, above expectations
Retail Sales: -0.7% MoM
Composite PMI: 49.9
Unemployment: 4.3%
Market Psychology:
Dominant Theme: Fiscal policy uncertainty
Secondary Theme: BOE rate cut trajectory
Forecasts:
GBP/USD: 1.28 (Q4 2024)
FTSE 100: 8,183.37
10Y Gilt Yield: 4.46%
Trading Sentiment:
COT Positioning: Leveraged funds net long
Key Levels: Support at 1.2500, Resistance at 1.2700
Tactical Opportunity: Wait for BOE hearing clarity
Rank 6: AUD - CHINA CONCERNS WEIGH
Fundamental Strength: Moderately Weak
Employment: +15.9K jobs
Unemployment: Steady at 4.1%
Manufacturing PMI: 47.3
Services PMI: 51.0
Market Psychology:
Dominant Theme: China slowdown concerns
Secondary Theme: RBA policy outlook
Forecasts:
AUD/USD: 0.65 (Q4 2024)
ASX 200: 8,165.90
10Y Yield: 4.61%
Trading Sentiment:
COT Positioning: Leveraged funds significantly net short
Key Levels: Support at 0.6450, Resistance at 0.6550
Tactical Opportunity: Short positions above 0.6550
Rank 7: CAD - BOC DOVISHNESS INTENSIFIES
Fundamental Strength: Weak
Inflation: 2.0% YoY
Employment: Sluggish growth
Manufacturing PMI: Signs of contraction
Oil prices: Under pressure
Market Psychology:
Dominant Theme: BOC easing expectations
Secondary Theme: Trade uncertainty under Trump
Forecasts:
USD/CAD: 1.40 (Q4 2024)
S&P/TSX: 24,131.83
10Y Yield: 3.20%
Trading Sentiment:
COT Positioning: Dealers net long, Asset Managers net short
Key Levels: Support at 1.3800, Resistance at 1.4000
Tactical Opportunity: Long positions above 1.3800
Rank 8: NZD - RBNZ EASING LOOMS
Fundamental Strength: Very Weak
Manufacturing PMI: 45.8
Unemployment: 4.8%
Business Confidence: Deteriorating
Trade Balance: Deficit widening
Market Psychology:
Dominant Theme: RBNZ rate cut expectations
Secondary Theme: Global dairy prices weakness
Forecasts:
NZD/USD: 0.59 (Q4 2024)
NZX 50: 12,516.35
Interest Rate: Expected 50-75 bps cut
Trading Sentiment:
COT Positioning: Heavily net short
Key Levels: Support at 0.5800, Resistance at 0.5900
Tactical Opportunity: Wait for RBNZ decision
Conclusion
The coming week presents several pivotal events that could reshape currency dynamics. Wednesday's RBNZ rate decision stands out as particularly crucial, with markets pricing in a 50 bps cut but growing whispers of a potential 75 bps move. The US Core PCE release, also on Wednesday, will be vital for Fed policy expectations and broader USD sentiment. Thursday's ECB minutes warrant close attention for signals about rate cut timing, while Friday's Canadian GDP data could validate the BOC's dovish stance.
Secondary but notable events include Thursday's Tokyo CPI for BOJ policy implications, Australian retail sales data as a consumer health check, and Tuesday's German IFO Business Climate index to assess political impact on sentiment.
Market Themes and Monitoring Framework
Central bank policy divergence remains the primary theme, particularly the contrast between Fed and ECB/BOE rate cut timing, RBNZ versus RBA policy paths, and the BOJ's normalisation timeline. Political risk continues to matter, especially German coalition stability and the implementation timeline for Trump's trade policies.
The economic divergence narrative persists, highlighted by the stark contrast between US services strength and manufacturing weakness, questions about European growth momentum, and uncertainty around China's recovery pace.
Sources:
Federal Reserve Data, ECB Statistical Bulletin, BOE Monetary Policy Report, BOJ Statistics, SNB Monthly Statistical Bulletin, RBA Statement on Monetary Policy, RBNZ Financial Markets Data, Trading Economics.