There is movement at the Federal Reserve, as indicated by Powell on Thursday, when he could get word in on policy:

• Fed’s Powell: Economy isn’t sending signals that we need to be in a hurry to cut
• the interviewer is asking non-stop political questions. Powell basically had to straighten her out

Goolsbee spoke on Friday:

• Fed’s Goolsbee says personally comfortable not ‚charging‘ towards neutral

trying to revert to dove mode:

• interest rates will be “a lot” lower over the next 12-18 months

but having to throw in the strong caveat:

• “As long we keep making progress toward the 2% inflation goal“

He spoke later on Friday also:

• thinks interest rates will come down along the lines seen in the recent dot plot projections
• said the current rate of inflation is “too high” to stay where it is for an extended period

He added that strong economic growth is not necessarily signalling the economy is overheating, citing productivity gains over the last year. Said that this rising productivity allows for faster economic growth without generating additional inflation“

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

Credit Agricole argues that despite similarities, 2025 will not be a redux of the USD’s 2018 rally driven by Trump-era policies. Differences in economic conditions, monetary policy, and the USD’s current strength suggest that the dynamics underpinning the dollar’s movement will differ significantly from 2018.

Key Points:

1. Divergent Economic and Monetary Conditions:
   • In 2018, strong US growth and rising inflation prompted the Fed to hike rates by 125bps.
   • In contrast, 2025 is expected to see slowing US growth and inflation, leading to further Fed rate cuts, which could temper USD strength.

2. Potential Stagflationary Impact:

   • The combination of trade tariffs and fiscal stimulus in 2018 supported growth, inflation, and higher US yields.
   • In 2025, this same mix could result in stagflationary pressures, complicating but not halting the Fed’s expected easing cycle.

3. Stronger USD Starting Point:

   • The USD is significantly stronger now than it was in 2018, which could constrain further gains.
   • A sharp EUR/USD decline closer to parity could limit the ECB’s ability to ease further, reducing divergence-driven USD upside.

Conclusion:

Credit Agricole acknowledges that Trump’s policy agenda has added upside risks to the USD, but a repeat of 2018’s rally is unlikely. Slower US growth, stagflation risks, and the already strong USD limit the potential for another broad-based surge, suggesting a more nuanced outlook for 2025.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.

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

• US October retail sales control group -0.1% vs +0.3% expected
• US November Empire Fed manufacturing survey +31.2 vs -0.7 expected
• US October industrial production -0.3% vs -0.3% expected
• US September business inventories +0.1% vs +0.2% expected
• US October import prices YoY 0.8% vs -0.1% prior
• Canada Sept wholesale sales +0.8% vs +0.9% expected
• Fed’s Barkin: I always have expected core PCE to stay in the „high twos“
• Fed’s Goolsbee: Unless conditions change, I feel good about 12-18 month path to neutral
• Fed’s Goolsbee says personally comfortable not ‚charging‘ towards neutral
• Atlanta Fed Q4 GDPNow 2.5%
• BOC senior loan officer survey: 1.71% vs 6.85% prior
• Fed’s Collins: Won’t take a December easing off the table, doesn’t see big urgency
• ECB’s Cipollone: We can and should reduce the level of monetary policy restriction
• Putin told Scholz peace agreement should proceed from new territorial realities

Markets:

• Gold down $4 to $2562
• US 10-year yeilds up 2 bps to 4.44%
• WTI crude oil down $1.71 to $66.99
• S&P 500 down 1.3%
• JPY leads, GBP lags

There wasn’t a tidy narrative on Friday as trading started out with a ’sell everything‘ mode before bonds made something of a comeback. Still, it was a tough one for stocks, bonds and equities. In that environment you would expect to see US dollar strength but that wasn’t the case as the euro and Australian dollars held steady.

The retail sales report was the main event of the day ahead it was better than the headline looked due to a strong September revision. However others would argue that was negated by a negative August revision. Still, there isn’t much of a debate going on about the US consumer right now with most arguing that spending will be healthy and could get a post-election bump.

The big move in FX was in USD/JPY. There was some intervention talk earlier and stronger verbal intervention. I’m dubious that was the cause but there was some real selling as about half of the week gain was wiped out in a 200 pip fall. The Fed has turned less dovish, which should help but the bond market could be sniffing some economic weakness out or there could be angst about tariffs and deficits.

Cable fell for the sixth day, which if fine with me because I’ll be in London next week. The pair broke the August low and continued down to 1.2600, which is flirting with the June low in what’s been a rough ride.

The loonie has been struggling alongside the pound and fell to a fresh four-year low, which meant a rise in USD/CAD to 1.4105 at today’s peak. The move was helped along by another decline in oil prices.

There is brewing concern about China and equities there were the global laggards this week. That’s a problem for the antipodeans but on Friday they shook off the worries to finish flat.

Have a great weekend and if you’re in London, I’ll be at FMAS 2024 next week.

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

The shine of the election has run into uncertainty about tariffs and elevated P/Es. Pretty much all the gains after the open on post-election morning are now gone and the S&P 500 is now threatening the opening gap while the Nasdaq has already taken a decent bite.

Trump’s cabinet picks are leaning heavily on „promises made, promises kept“ and the market is wondering about the biggest promises: 60% tariffs on China, 10% across the board and mass deportations of 11m illegal immigrants.

Closing changes:

• S&P 500: -1.3%
• Nasdaq Comp: -2.2%
• DJIA: -0.7%
• Russell 2000: -1.5%
• Toronto TSX Comp: -0.7%

On the week:

• S&P 500: -2.1%
• Nasdaq Comp: -3.1%
• Russell 2000: -4.0%
• Toronto TSX Comp: +0.5%

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

Bitcoin is closing out a great week on a positive note. It briefly fell below $88K in US trading but has been steadily bid since and particularly in the past hour.

It’s now up 3.3% on the day to $91,200 and that’s coincided with a modest rebound in risk appetite more broadly.

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

• I hope and expect that in Q1, inflation will come down
• Pricing power is more limited
• I am still seeing progress on inflation
• We are a long way from knowing what will happen with tariffs

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

US equities are making new lows but bonds have turned around.

Ten-year Treasury yields touched the highest since May earlier today at 4.50% but have since turned around and are now down 1.6 bps on the day to 4.40%.

That’s a solid rejection but the next hurdle is yesterday’s low. A drop below that would end a series of higher lows and if it comes with more equity selling it could be part of a broader flight to safety.

USD/JPY will also key off of yields and could further retrace if this move continues.

Interestingly, the big jump in yields started after the Fed cut 50 bps and now the turn lower is coinciding with Powell saying the FOMC is in no hurry to cut rates. Other officials have taken a similar less-dovish tone.

The thinking in the bonds market is about that reaction function. When the Fed cut 50 bps it cut tail risks around a recession and added to inflation risks, particularly after waves of strong data following the cut.

In contrast, the Fed pausing now would work to squash inflation and curb growth.

So there is a bit of a dance going on here that’s worth keeping an eye on.

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

Is this where the train stops for the dollar? The post-election run higher has been without much pause but finally we might be getting that today. The greenback is down across the board, retracing just a slight bit of the gains from this week. USD/JPY is the biggest loser, down 0.6% to 155.33 currently. However, it is still not quite meeting any key near-term levels just yet.

The 100-hour moving average (red line) is lining up with the 155.00 mark now. And that’s the key level to watch for any shifts in near-term momentum for the pair.

Similarly, EUR/USD may be up 0.4% to 1.0575 but is not yet contesting its own 100-hour moving average of 1.0595 at the moment. That’s a key pair that has arguably played a role in the turnaround against the dollar today, owing to a rebound off the 1.0500 mark from yesterday. For some context on the importance of said level: EUR/USD feels the inevitable pull towards 1.0500 next

Besides that, GBP/USD is up 0.2% to 1.2690 and USD/CAD down 0.2% to 1.4035 currently. And AUD/USD is up 0.4% to 0.6475 with NZD/USD up 0.4% to 0.5870. It’s pretty much a case of a very light pullback in the dollar gains since the election result. The greenback is still poised to end the week comfortably higher.

That being said, it’s still worth keeping an eye out in case we see any shifts in near-term biases. That might help to indicate a top in the dollar, at least for this latest rally.

In other markets, stocks are also down with S&P 500 futures lower by 0.5%. Are Trump trades getting a bit of a check back? Bitcoin is up 1.4% to $89,490 but still holding below the $90,000 mark on the day. Meanwhile, 10-year yields are flat at 4.44% and gold is up slightly by 0.2% to $2,572 currently. So, there’s definitely some suggestion there.

The next key risk event on the day will be the US retail sales data release. With Fed chair Powell highlighting the potential for a pause yesterday, a strong report here may well keep market players inclined to lean towards that if other data in the weeks ahead also falls in line.

The expectation is for retail sales to come in at +0.3% month-on-month with the control group reading also estimated at +0.3%.

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

Fundamental
Overview

The S&P 500 rallied
into a new all-time high following Trump’s victory and the red sweep as the
market started to look forward to bullish drivers like tax cuts and
deregulation.

The only bearish reason
people were looking at was the rise in Treasury yields. That’s generally
bearish only when the Fed is tightening policy not when yields rise on positive
growth expectations.

Right now, the Fed’s
reaction function is that a strong economy would warrant an earlier pause in
the easing cycle and not a tightening. That should still be supportive for the
stock market.

If the Fed’s reaction
function changes to a potential tightening, then that will likely trigger a big
correction in the stock market on expected economic slowdown.

For now, the current
pullback looks as something healthy given the very strong rally following Trump’s
victory, so the dip-buyers should be happy about it.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 is pulling back to the key support level around the previous all-time high at 5927.
This is where we can expect the buyers to step in with a defined risk below the
level to position for a rally into a new all-time high. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into the trendline
around the 5800 level.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a 38.2% Fibonacci
retracement level standing right around the support level. This should
technically strengthen the support and give the buyers a good level where to
lean at and protect their stops. The sellers will look for a break lower to
increase the bearish momentum into the trendline.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor downward trendline defining the current pullback. The
sellers will likely continue to lean on it to position for new lows, while the buyers
will look for a break higher to increase the bullish bets into new highs. The
red lines define the average daily range for today

Upcoming
Catalysts

Today we conclude the week with the US Retail Sales report.

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

Fundamental
Overview

The US Dollar yesterday
weakened across the board despite a higher than expected US Core PPI and Fed Chair Powell acknowledging the need to proceed
more carefully with rate cuts from here on.

This might be a signal that
the market could be fine with just two rate cuts priced in for 2025 and will
need some stronger reasons to price out those as well. This could trigger a
bigger pullback in the US Dollar after the incredible run since the beginning
of October.

On the GBP side, this week
we got the UK labour market report and although the data was
mostly mixed, it leant more on the dovish side. The UK
GDP this morning missed expectations slightly but overall the week didn’t
change much for the BoE.

The market sees just a 17%
chance of a 25 bps cut in December and a total of 61 bps of easing by the end
of 2025.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD is testing a key swing low level at 1.2660. This is where the
buyers are stepping in with a defined risk below the level to position for a
pullback into the major downward trendline.

The sellers, on the other
hand, will want to see the price breaking lower to increase the bearish bets
into new lows although a break below the major upward trendline will give them
much more conviction.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the consolidation around the key level. There’s not much else
we can glean from this timeframe so we need to zoom in to see more details.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the price is breaking out of the minor downward trendline that was
defining the bearish momentum on this timeframe. The buyers will likely start
to pile in here to position for the pullback into the major trendline and will
likely increase the bullish bets on the break of the minor resistance zone
around the 1.2715 level.

The sellers, on the other
hand, will likely step in around the resistance to position for the break below
the major upward trendline. The red lines define the average daily range for today.

Upcoming
Catalysts

Today, we conclude the week with the US Retail Sales data.

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