• ECB’s Lagarde: We will return inflation to 2%, it is happening
• BOC’s Macklem: We are not expecting a recession
• Harker: Fed is likely to be done with rate hikes
• Harker: Banks tell Fed there is almost no activity for first-time home buyers
• BOJ’s Ueda: There is no big change to my view on the global economic outlook
• US September import prices +0.1% vs +0.5% expected
• Baker Hughes US oil rig count 501 vs 497 prior
• UAW Fain: Not announcing any new expansion of strikes today.

Markets:

• Gold up $60 to $1928
• Oil up $4.74 to $87.65
• US 10-year yields down 7.9 bps to 4.62%
• S&P 500 down 0.6%
• CHF leads, NZD lags

This isn’t the kind of price action anyone wants to see while bombs are flying in the Middle East. The strength of the rallies in gold and oil suggest some real fear about a wider conflict beyond Gaza. At best, these moves signal caution mixed in with some short covering but the larger they got as the day wore on, the more it felt like something ominous.

The Swiss franc was the safe haven of choice with sales in EUR/CHF kicking off midway through European trading and extending into the European close.

The pound was also sold for the second day, falling 40 pips and finishing near the lows of the day at 1.2134. The two day slide in cable wiped out the previous five days of gains and leaves a sustainable bounce in doubt.

The antipodeans remain the larger laggards as a three-day fall in NZD/USD puts the pair back to within striking distance of the September lows, which are also the lows of the year. That’s in a week where China floated more fiscal stimulus so it underscores the level of worry.

Treasury yields weren’t as big of a factor today as 30-year yields fell 11 bps on something of a safe haven bid. That’s a big turn after the terrible auction yesterday.

The next big question is what happens on the weekend and beyond. There’s a risk that we’re not into WWIII by the time markets reopen (though Dalio says there’s a 50/50 chance it’s coming) and if that’s the case, we should see some of the safety premium fade.

Have a safe weekend.

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

• S&P 500 down 0.6%
• DJIA +0.1%
• Russell 2000 -0.8%
• Nasdaq Comp +1.3%
• Toronto TSX Comp -0.3%

Closing changes for the week:

• S&P 500 up 0.4%
• DJIA +0.8%
• Nasdaq Comp -0.2%

You hate to see Lockheed Martin up 1.6% and closing near the best levels of the week ahead of potential Middle Eastern war.

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

That move goes against the current prevailing market thinking that has the Fed stuck on the sidelines for months. Current pricing suggests only an 8% chance of a hike on Nov 1 and about 30% for the Dec 13 meeting.

CIBC said the upcoming forecast will include „an additional Fed rate hike
before this year ends, and a further delay before our forecast
slowdown kicks in“ along with an upward forecast to US growth.

Coupled with that will be a boost in Q3 GDP to „nearly 4%“ from 2.5% just a month ago. They also estimate only a small chance that Q4 growth is negative.

„We still expect that an outright
recession can be avoided if the central bank plays its cards right,
and starts to ease rates in the latter half of 2024,“ CIBC writes.

As for the rate hike call, it appears to have a conditional element.

„if long rates start to edge lower again,
as they could in the absence of a fed funds hike in October, that
could see them hike again before year end,“ CIBC writes.

„We’ll risk being a broken record by simply pushing back our call
for a stall in US growth into Q1 of 2024. Some of the leading indicators for such a retreat, including slowing bank lending,
and weaker activity in interest-senstive measures like housing
starts and resales, are still pointing that way, as is the market’s
favourite omen, an inverted yield curve.“

The Canadian bank notes that it won’t be boosting up its BOC forecast for terminal rates, saying that current interest rates are already providing a sufficient headwind to growth.

Looking to next week, CIBC highlights speeches from Williams and Chair Powell for potential signals about how higher long-dated yields will affect rate setting. Next Saturday the FOMC blackout also begins.

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

Yet today we have oil up $4.69 to $87.56 and above the post-Hamas attack peak.

I highlight the fibonacci retracement levels from the October rout on this chart with the first bounce stalling out at the 38.2% level and this rally yet to hit the 50% level. But also notice the three-candle reversal over the past three days and the higher low. Those are bullish signals in a market that’s still materially short oil supply due to OPEC+ curbs.

This week we had Russian President Putin endorse OPEC+ and say that cooperation is likely to be extended. But the main driver is Middle Eastern war and the potential for something to spill over into Iran or the region more broadly. There is also an increasing belief that some possible grand bargain between the US and Saudi Arabia to pump more oil and recognize Israel in exchange for US defense guarantees is a unworkable for now.

I tend to think there’s a big ‚weekend risk‘ bid and/or short covering underway right now but we won’t know until Monday.

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

The bias is more to the downside, thanks to a run higher in the USD on Thursday in Friday.

Today, the price moved into a swing area between 1.0483 and 1.0500. That area will be a barometer for both buyers and sellers to start off the new trading week.

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