Fed Officials Divided
US Treasury yields advanced across the curve on Monday, pushing the benchmark 10-year yield to 4.10%. In a week full of Fed speak, several key voices made the airwaves yesterday, including Fed Governors Lisa Cook and Stephen Miran – both of whom are voters – as well as Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly. Evidently, internal division within the Fed remains a concern. Miran continues to advocate for bumpier 50-bp rate cuts, while Goolsbee expressed more concern about inflation than the jobs market, and Cook and Daly are essentially ‘keeping an open mind’ about December’s meeting.
This follows the Fed cutting the Federal funds target rate by 25 bps to 3.75% – 4.00% last week, in what was widely viewed as a ‘hawkish cut’ thanks to Fed Chairman Jerome Powell’s cautious commentary at the press conference.
The USD Index eked out a fourth straight gain yesterday, adding 0.2%; however, you can quite clearly see that momentum is waning. It is also worth noting that price action is testing monthly resistance around 99.67, with the 200-day SMA circling just north of this level at 100.42.
Mixed US Manufacturing Data Ahead of Wednesday’s Services Print
On the macro front, US manufacturing contracted in October, with the ISM manufacturing PMI report showing the headline number fell by more than expected to 48.7 from 49.1 in September. According to the sub-indices, price pressures eased to 58.0 from 61.9, while the employment component increased to 46.0 from 45.3. By and large, this was a relatively mixed bag and did little to move the market’s needle. Nevertheless, if a similar vibe in tomorrow’s ISM services PMI materialises, it could trigger a more pronounced reaction.
RBA Holds the Line
Overnight, we also got an update from the RBA, announcing that it would keep the cash rate on hold at 3.60%. This should not raise too many eyebrows, as around 2 bps of easing was priced in for this meeting following the much stronger-than-expected September CPI inflation print.
The central bank’s quarterly projections indicate inflation will remain above the 1% – 3% target band until mid-2026, despite unemployment reaching a three-year high of 4.5%. The RBA anticipates only one rate reduction in the coming year, acknowledging conflicting economic signals: rising property values and credit expansion, counterbalanced by manufacturing weakness.
