They’ve had higher rates than Australia over in the UK, with its Reserve Bank also taking a cautious approach to cuts.

Right now the British central bank has rates at 4.75% and just a few hours ago the Bank of England voted to keep them on hold again.

There was a bit of a split in that decision, with three of the BoE’s nine member committee wanting to cut to 4.5% as the British economy struggles with growth.

Here’s a CBA note on the currency implications:

AUD/GBP lifted by almost 0.4% immediately after the Bank of England (BoE) voted 6‑3 to keep the Bank rate steady at 4.75%.  Governor Bailey said ‘a gradual approach to future interest‑rate cuts remains right’.  We expect the BoE to cut by 25bp at its February meeting which is about 70% priced.   AUD/GBP can fall further in coming weeks alongside AUD/USD.  But bets on BoE easing will likely prevent a test of its March 2020 of 0.4796.

These notes in from Reuters:

U.S. stocks rose on Thursday, bouncing modestly from a sharp drop in the prior session after the Federal Reserve forecasts fewer-than-expected interest rate cuts and higher inflation next year.

The Dow Jones Industrial Average .DJI rose 235.23 points, or 0.56%, to 42,561.75, the S&P 500 .SPX gained 28.11 points, or 0.48%, to 5,900.05 and the Nasdaq Composite .IXIC gained 99.50 points, or 0.52%, to 19,492.13.

Meaning that:

Australian shares are set to fall for the second consecutive session on Friday, with commodity and energy stocks expected to be weighed down by falling commodity prices.

The local share price index futures YAPcm1 fell 0.6%, a 51.2 point discount to the underlying S&P/ASX 200 index .AXJO close. The benchmark ended 1.7% lower on Thursday.

Meanwhile, a Japanese skiing holiday over the Australian summer is looking pretty tempting.

The AUD is buying near 100 Yen

Here’s CBA’s take:

AUD/JPY lifted to around 98.5 overnight.  There is a small chance AUD/JPY tests the next support at 94.69 (23.6% fibbo) if AUD/USD eases.  Though a cautious Bank of Japan will prevent a larger fall.  Japan’s nationwide CPI for November is released today (10:30am Sydney time).

CBA’s morning currency read has just hit.

Its analysts think that while the AUD has regained a little bit of ground overnight to 62.42 US cents, that it will probably slump back down towards 60 US cents soon.

Here’s the note:

AUD/USD recouped some losses to be near 0.6250.  AUD/USD has slumped by 7 US cents so far this quarter.  There is a modest chance AUD/USD tests support at 0.6099 in the next few weeks (23.6% fibbo, 5 year) if the USD keeps tracking higher

Meanwhile this on the US currency:

USD rose further to near 108.5pts overnight amid higher long end US Treasury yields.  A benign 0.2%/mth core PCE deflator in November will unlikely be enough to ease the FOMC’s concerns about the slow pace of disinflation (12:30am Sydney time).  We now expect the FOMC to pause its easing cycle in January 2025

Look, its better than yesterday.

The Australian dollar hit a two year low yesterday down near 60 US cents. It’s gained back 0.6% of its value overnight as the fears of higher rates in the US for longer calm down.

We’ll keep an eye out for forecasts for the Aussie dollar this morning ahead of your Summer holiday plans.

You can read more about why the dollar is so low here.

Are we getting coal in our stockings today?

Yesterday saw a big fall in Australian shares of 1.7% and right now ASX futures are down about 0.6%.

But Wall Street did stage a bit of a recovery overnight as some investors worry they overreacted to those rate cut forecasts.

We’ll be here with you all day!