There will be previews of the week ahead soon to come but the big two events next week are:

• Federal Reserve Chair Powell discussing the US economic outlook at a National Association for Business Economics conference on Monday. This is at 1300 US Eastern time on Monday, September 30 (1700 GMT).
• On Friday, October 4, at 0830 US Eastern time (1230 GMT) we’ll get the US payroll report for September. Expectations are for a slight improvement from August for the headline and a steady jobless rate. If so the prospect of a ’soft‘, even ’no‘ landing for the US economy will increase.

Other previews of the week will be along, with Chinese data and other indicators of the US employment market. But the biggges are Powell and NFP. Strap in!

This article was written by Eamonn Sheridan at www.forexlive.com.

• US August core PCE +0.1% vs +0.2% expected
• Canada GDP for July 0.2% versus 0.1% expected
• US Advanced goods trade balance for August $-94.26 billion vs. -100.60B estimate
• US September UMich final consumer sentiment 70.1 vs 69.3 expected
• US wholesale inventories advanced for August 0.2% versus 0.3%
• Baker Hughes US oil rig count 484 vs 488 prior
• Musalem: Fed should cut rates gradually
• China urges local companies to stay away from Nvidia AI chips – report
• Timiraos on why lower rates don’t necessarily mean lower rates
• Atlanta Fed GDPNow Q3 forecast +3.1% vs +2.9% prior
• China cuts borrowing cost of standing lending facility by 20 bps
• Incoming Japan PM Ishiba: Japan will deploy fiscal stimulus if needed
• Israel strikes Hezbollah HQ and targets its leader
• Iran supreme leader holds emergency meeting of security council – report

Markets:

• Gold down $19 to $2650
• US 10-year yields down 3.6 bps to 3.75%
• WTI crude oil up 75-cents to $68.41
• S&P 500 down 7 points to 5738
• JPY leads, CAD lags

It’s tough to separate what was driven by quarter-end flows and what was driven by fundamentals. There was certainly some US dollar selling after Friday’s PCE report and the delivery of the China rate cut. However that 40-pip move was erased later. Some of that may have been due to Middle East worries but the conflict hasn’t been much of a market mover lately and if that was the driver you would expect more gains in gold and oil.

One move that was clearly fundamental was the choice of a new PM in Japan as the choice of Ishiba was met with a hawkish response leading to a huge rally in the yen and a 6% dive in Nikkei futures. Clearly the market was leaning towards the dovish Takaichi, particularly after the first round of votes.

USD/JPY was crunched on the news and continued to fall in US trading and is on track to close at the lows of the day/week at 142.11. The pair got some help from fixed income as the recent selling reversed by 2-6 bps in a front-end led flattener pulled down by the PCE report as well.

AUD and NZD are continuing to outperform on China optimism and we will note that Chinese markets are open Monday then closed for the rest of next week. We could get more stimulus announcements before then, and the market could also be pricing that in, so silence could be a downside risks. But spare a moment for the AUD/USD chart, as it looks to be breaking above a series of tops.

It was a lively week, have a great weekend. Next week we get another edition of non-farm payrolls.

This article was written by Adam Button at www.forexlive.com.

Closing changes in North American equities:

• S&P 500 -0.1%
• Nasdaq Comp -0.4%
• DJIA +0.3%
• Russell 2000 +0.7%
• Toronto TSX Comp -0.3%

On the week:

• S&P 500 +0.6%
• Nasdaq Comp +1.0%
• DJIA +0.6%

US stocks had a strong start and liked the PCE report but the bombing in Beirut along with quarter-end flows added some caution. Nvidia was also weak on a report about China discouraging its chips.

This article was written by Adam Button at www.forexlive.com.

The FT interviewed St Louis Fed President Alberto Musalem and he said that future cuts should come gradually but that if there’s further weakness, a faster pace could be appropriate. That’s hardly a departure from Powell.

This article was written by Adam Button at www.forexlive.com.

Iran’s supreme leader, Ayatollah Khamenei, is holding an emergency meeting of the Supreme National Security Council at his home compound, in response to Israel’s strike in Beirut that targeted the leader of Hezbollah, Hassan Nasrallah.

The latest reports suggest Nasrallah was killed but there have been many conflicting reports for hours.

The market seemingly isn’t too worried that Iran will get involved over the weekend. Perhaps the thinking is that they would have after the assassination in Beirut if so.

This article was written by Adam Button at www.forexlive.com.

Bloomberg is out with a report saying China is ramping up pressure on domestic companies to use domestic chip products rather than Nvidia chips.

Shares of Nvidia are down 3.5% and at a session low and weighing on the broader market. The Nasdaq is now down 0.6%.

The thing is, this exact same story was out in May.

This article was written by Adam Button at www.forexlive.com.

Headlines:

• Japanese yen surges as Ishiba wins leadership race to become next Japan prime minister
• Shigeru Ishiba wins LDP leadership race run-off, will be Japan’s next prime minister
• Weekly update on interest rate expectations
• BNP Paribas revises call and sees the ECB cutting rates in October now
• Goldman Sachs the latest to change their call on the ECB, now expects rate cut in October
• Spain September preliminary CPI +1.5% vs +1.9% y/y expected
• France September preliminary CPI +1.2% vs +1.6% y/y expected
• Germany September unemployment change 17k vs 12k expected
• Eurozone September final consumer confidence -12.9 vs -12.9 prelim
• UK September CBI retailing reported sales 4 vs -27 prior
• Fears of widespread damage as Hurricane Helene makes landfall in Florida

Markets:

• JPY leads, GBP lags on the day
• European equities higher; S&P 500 futures down 0.1%
• US 10-year yields down 0.4 bps to 3.784%
• Gold down 0.1% to $2,667.98
• WTI Crude up 0.2% to $67.82
• Bitcoin up 1.1% to $65,410

Shigeru Ishiba finally won Japan’s top job, as he won the LDP leadership race to become prime minister.

It’s been 12 years in the making after he lost out to then prime minister Shinzo Abe back in 2012. And when Sanae Takaichi led during the first round of votes, it looked like it might be another near miss again for Ishiba. But in the run-off votes, the odds turned in his favour and he came out as the winner.

As Takaichi led after the first round of votes, the yen fell hard with USD/JPY racing up to a high of 146.50. But the moment Ishiba was announced the victor of the run-off, that led to a sharp plunge in which the pair fell to 143.20. The low for the day then touched 142.76 before the pair is settling around 143.15 currently, down 1.1% on the day.

For some context, Takaichi had been one of the more vocal candidates and she strongly opposes the BOJ’s current plans for normalising monetary policy. She said that the rate hikes by the BOJ this year have been too quick for her liking and she would prefer rates to stay lower for longer.

Besides that, the larger focus in markets continues to stay on China and domestic equities ended the week with a flourish. The Shanghai Composite closed up by 2.9% and CSI 300 up by 4.5% today. And on the week, the former gained by nearly 13% and the latter by nearly 16% to its highest since October 2023. W Chinese stocks.

However, that didn’t quite lead to broader market moves today as compared to yesterday though.

The dollar held steadier throughout, with major currencies outside of the yen observing some light pushing and pulling during the session.

EUR/USD did fall to a low of 1.1125 as French and Spanish inflation numbers came in softer for September. That continued to rebuff expectations for an ECB rate cut next month, with the futures market showing ~94% odds priced in currently.

But with much of that already priced in, the pair bounced back a little to 1.1165 now – still down 0.1% on the day.

In the equities space, European indices are staying buoyed on ECB rate cut expectations. But the mood in US markets are less enthused with futures keeping marginally lower.

All eyes are on the US PCE price index next to add to the mix as market players look to wrap up the week.

This article was written by Justin Low at www.forexlive.com.

They had previously penciled in a 25 bps rate cut for December instead. So, they’re changing to October now. BNP and HSBC are the other two names on the list but I’d expect the rest of the houses to change up their calls in the next week or so as well. From earlier: BNP Paribas revises call and sees the ECB cutting rates in October now

Update: JP Morgan now also says that they see the ECB cutting rates starting from October.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

The USD remains under
pressure amid the aggressive market pricing for rate cuts and better global
growth expectations following the recent huge Chinese easing measures. It’s now
a battle between global growth supporting the risk sentiment and weighing on
the greenback and the aggressive rates pricing which could be scaled back if
the US data starts to pick up.

On the CAD side, the latest
soft Canadian CPI raised the probabilities for a 50
bps cut at the upcoming meeting as BoC’s Macklem hinted to a possibility of
delivering larger cuts in case growth and inflation were to weaken more than
expected. The market sees a 47% probability for such a move.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD dropped all the way back to the recent lows around the 1.3420
level. This is where the buyers stepped in to position for a rally back into
the 1.36 resistance.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into the 1.32 handle next.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price broke above the downward trendline today and stalled at the resistance
zone around the 1.35 handle. The buyers will want to see the price breaking higher
to increase the bullish bets into the 1.36 resistance, while the sellers will
likely step in around these levels to target a break below the 1.3420 level.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else to add but a drop below the most recent higher low at 1.3455
would likely see the bearish momentum increasing. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the Canadian GDP and the US PCE.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

They are the next one to shift towards this call, following from HSBC before this. Both had previously expected the ECB to cut rates in December instead.

Meanwhile, Deutsche Bank was also out in saying that the ECB needs to step up their pace of rate cuts here. But their call came right before this report from Reuters, which sparked further bets by market players in pricing in a rate cut next month.

This article was written by Justin Low at www.forexlive.com.