Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated that he anticipates a slowdown in the U.S. economy this year, yet it will remain robust, adding that the path to lower inflation may encounter some bumps. Bostic projected that due to households spending their savings, the U.S. GDP growth rate in 2025 is expected to be around 2%, while this year's economic growth rate is anticipated to reach 2.6%. The Atlanta Fed President also mentioned that, in the long term, the Federal Reserve's benchmark interest rate is expected to drop to around 3% to 3.5%, but the timing of this reduction remains uncertain. Currently, interest rates are between 4.75% and 5%. Bostic said in a speech in Atlanta on Tuesday, "Everyone asks us 'how fast?' I believe it depends on the labor market and the state of inflation. In fact, I think we will see fluctuations in inflation and strong employment." Bostic indicated last week that he would be willing to keep interest rates unchanged at one of the two remaining Federal Reserve meetings this year if the data supports it. He reiterated on Tuesday that, at last month's meeting, he expected a 25 basis point rate cut this year, but the ultimate path of interest rates will depend on economic conditions.
Additionally, the International Energy Agency (IEA) stated that ample oil supplies offset geopolitical risks, and the oil market faces a supply surplus in the new year. Geopolitical risks to oil production in the Middle East and other regions are being offset by ample global supplies, thereby controlling oil prices. Although geopolitical risks pose a threat to the region's energy infrastructure, the growth in production from non-OPEC+ countries such as the United States, against a backdrop of near-record spare capacity in OPEC+, is expected to cause a supply surplus at the beginning of 2025. The IEA pointed out that oil supplies continue to flow into the market, and in the absence of significant disruptions, the market will face a substantial supply surplus in the new year, which will replenish the current low levels of inventory. The slow growth in world oil demand will pale in comparison to the increase in supplies outside the OPEC+ alliance. Supplies from the United States, Brazil, Canada, and Guyana are all increasing.
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Data to watch today includes the UK's September CPI year-on-year rate, the UK's September retail price index year-on-year rate, the UK's September unadjusted input PPI year-on-year rate, the US September import price index month-on-month rate, and Canada's August manufacturing sales month-on-month rate.
Gold/USD
Gold fluctuated higher yesterday, closing slightly higher on the daily chart, with the current exchange rate trading around 2669. In addition to the continued strong support for gold from expectations of further interest rate cuts by the Federal Reserve this year and lingering market safe-haven sentiment, the decline in U.S. Treasury yields also provided some support for gold. However, the rise in the US Dollar Index, supported by the cooling expectations of significant further rate cuts by the Federal Reserve, limited gold's upward space. Today, focus on the resistance around 2680, with support near 2660.
AUD/USD
The Australian Dollar fluctuated lower yesterday, hitting a five-week low, with the current exchange rate trading around 0.6690. In addition to the US Dollar Index's continued rise, supported by factors such as cooling expectations of significant further rate cuts by the Federal Reserve, which put some pressure on the Australian Dollar, geopolitical tensions-driven safe-haven sentiment and the decline in commodity prices such as crude oil, international copper, and iron ore also put some pressure on the commodity currency, the Australian Dollar. Today, focus on the resistance around 0.6800, with support near 0.6600.
USD/CAD
The USD/CAD fluctuated lower yesterday, closing slightly lower on the daily chart, with the current exchange rate trading around 1.3780. In addition to profit-taking putting some pressure on the exchange rate, expectations of further interest rate cuts by the Federal Reserve this year and the decline in U.S. Treasury yields also put some pressure on the exchange rate. However, the cooling expectations of significant further rate cuts by the Federal Reserve, the Bank of Canada's rate cut expectations, and the decline in crude oil prices limited the exchange rate's downward space. Today, focus on the resistance around 1.3850, with support near 1.3700.
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