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Markets finally settled down on Friday after a volatile week. Some traders were probably grateful for the day off. While the impact of a 50 basis point cut will take some time to materialise, debate surrounding the Fed’s decision is already in full throttle. The cut was larger than first expected, which raises the inevitable question of whether Federal Reserve board members are concerned about a slowdown in the US economy.
We may have an answer to this as early as today, with the release of manufacturing and services PMI figures, not just in the US but in the UK and Europe as well. Australia published its own indices this morning; manufacturing coming in at 46.7 and services at 50.6; both a sizeable step under expectations. Oil forecasts also back up the idea of a global reduction in industrial output. Of course, an argument could be made that the greater rate cut is in fact the result of the Fed dragging its feet earlier in the year and is only now catching up. As an aside to all of this, markets will soon have to contend with the next US presidential election on the 5th of November – a mere six weeks away.
In the end, the only asset to not hold back was gold. The precious metal gained $35 on Friday to breach $2,600 an ounce and clock yet another record high.
Looking at the economic calendar, besides the aforementioned PMI figures, traders will have to wait until later in the week for some of the more substantial data publications. On Thursday, the Swiss National Bank is expected to cut rates on the Swiss Franc down to 1%. Later in the day US GDP and jobless claims are set to grace the newswires, followed by a speech from Jerome Powell. The PCE price index closes out the week on Friday.
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