• US 2023 fiscal deficit $1.695 trillion vs $1.375 trillion in 2022
• Canada August retail sales -0.1% versus -0.3% expected
• Fed’s Harker: Now is the time to hold rates steady
• Jim Jordan loses secret ballot to remain House speaker nominee
• Hostages released from Gaza are currently with the Red Cross – report
• Fed’s Mester: Looking at lots of data on mon pol, including money supply
• Baker Hughes US oil rig count 502 vs 501 prior
• UAW Pres. to present plans to workers later today
• Feds Mester: Fed is at or near the peak of the rate hike cycle
• Fed’s Bostic: We are not going to see a recession
• Canada’s tallest building goes into bankruptcy, not even half-built

Markets:

• WTI crude down 20-cents to $88.14
• US 10-year yields down 7.6 bps to 4.91%
• Gold up $5 to $1978
• S&P 500 down 56 points, or 13%
• GBP leads, NZD lags

Equities took another beating but there were signs of optimism elsewhere. Buyers arrived in fixed income after a test of 10s early in US trading that got to 4.995% but not through. Gold and oil gave back gains, in part due to a report about hostage negotiations in Gazaw.

In FX, there was some stability that might have been paralysis as 150.00 continues to hold in USD/JPY and uncertainty reigns. The antipodeans were soft but not overly so as AUD/USD fell 17 pips and NZD/USD declined by 22 — both staying in recent ranges.

Cable reflected some of the optimism as it trended to 1.2165 from 1.2100 as it marked a double bottom just below the figure. The euro also chopped higher.

In all, the deep confusion about what will happen in bonds, USD/JPY and the Middle East is making for a wait-and-see market. Stocks were hit hard though in a broad move as TSLA continues to retreat following a disappointing earnings report. Next week will be critical with a busy slate of earnings including Microsoft, Alphabet and Visa on Tuesday.

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

US stocks are closing the session at the lows with the Nasdaq index leading the way.

The final numbers are showing:

• Dow industrial average -286.91 points or -0.86% at 33127.27
• S&P index -53.84 points or -1.26% at 4224.15
• NASDAQ index is down -202.38 points or -1.53% at 12983.80

For the trading week, the NASDAQ fell over 3%.

• Dow industrial average fell -1.61%
• S&P index fell -2.39%
• NASDAQ index -3.16%

Helping to pressure the stocks into the close, is the S&P’s technical break and close below its 200-day moving average at 4233.13. It was the 1st close below that moving average since March 22.

Concerns about interest rates, the Middle East, Washington stagnation all contributed to anxiety in the US stock market. Next week a slew of earnings will be released including 4 of the so-called Magnificent 7 – Microsoft, Alphabet, Meta and Amazon. In addition, there are a number of other large cap names scheduled to announce their earnings (see the schedule here).

This article was written by Greg Michalowski at www.forexlive.com.

What happens to the deficit when the economy turns? I know some of this is long-term infrastructure spending but if the bond market is signalling problematic deficits, some tough choices are going to have to be made.

• Sept deficit $171B vs -$78.6B expected
• Sept 2022 deficit $430B

The deficit in the 2023 fiscal year was larger than every pre-covid deficit.

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

It has been a negative week for the major US stock indices, as rates moving higher, geopolitical tension, and dysfunction in Washington. That dynamic does not seem to be going away anytime soon.

However next week we get a slew of corporate earnings with something for everyone. A total of 4 of the „Magnificent 7“ are scheduled to be released including Microsoft, Alphabet, Meta, and Amazon.

Tesla – another of the 7 – already released this week (it was a disappointment). Nvidia and Apple will announce in the future.

In addition to the big 4, there are a number of other large cap companies scheduled for release.

Below are the major companies on the earnings calendar (* are companies who will announce before the open):

Monday:

• Phillips*
• Logitech

Tuesday:

• Coca-Cola*
• Verizon*
• GE*
• 3M*
• GM*
• Microsoft
• Alphabet
• Visa
• Texas Instruments

Wednesday:

• Boeing*
• T-Mobile*
• Hilton*
• General Dynamics*
• Meta
• IBM
• servicenow

Thursday:

• Altria*
• Southwest*
• Northrup Grumman*
• Merck*
• Amazon
• Intel
• Ford
• Chipotle

Friday:

• Exxon Mobil*
• Chevron*
• Phillips 66*
• Colgate-Palmolive*

This article was written by Greg Michalowski at www.forexlive.com.

Synopsis: Despite its historical strength and the ‚USD smile‘ framework, the USD’s recent subdued performance has left market observers questioning the continued applicability of this model. Credit Agricole delves into the factors affecting the USD’s momentum and highlights the potential paths for the currency moving forward.

Key Takeaways:

1. Synchronized G10 Rates and Yields: One of the chief factors that may have hampered the USD’s surge is the synchronized movement of most G10 rates and yields. This synchronous movement has marginally improved the USD’s relative rate appeal, making it less of a standout amidst its peers.

2. Fed’s Signal on Financial Conditions: The Federal Reserve has hinted that a combination of higher US rates, increased yields, and risk aversion could dampen the urgency for additional rate hikes. This signaling potentially curbs aggressive bullish sentiments for the USD.

3. Rising Foreign Portfolio Outflows: The US has witnessed a surge in foreign portfolio outflows from its fixed income markets. This trend is attributed to deteriorating fiscal prospects in the US coupled with diminishing FX reserves. Such outflows can act as a drag on the USD’s strength.

4. Overhang of USD Long Positions: An accumulation of long positions on the USD could be indicating market saturation, making further bullish movements harder to achieve.

5. The ‚USD Smile‘ Framework: While recent events have made market participants question the relevance of the ‚USD smile‘, Credit Agricole believes it remains a pertinent FX market model. The primary channel that could bolster the USD, under this framework, is a sudden surge in risk aversion leading to a robust inflow into US safe-haven assets.

Conclusion: While recent dynamics have posed challenges to the USD’s dominant trajectory, the ‚USD smile‘ remains a relevant tool to understand potential currency movements. The USD might find significant support if global markets witness heightened risk aversion, channeling more investments into safe-haven US assets. Investors should be vigilant of global risk sentiments to gauge future USD movements.

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