UPCOMING
EVENTS:

• Monday: US and Canada Holiday, Fed’s Waller. (US stock
  market open/bond market closed)
• Tuesday: UK Labour Market report, German ZEW, Canada CPI,
  New Zealand Q3 CPI.
• Wednesday: UK CPI.
• Thursday: Australia Labour Market report, ECB Policy
  Decision, US Retail Sales, US Jobless Claims, US Industrial Production and
  Capacity Utilization, US NAHB Housing Market Index.
• Friday: Japan CPI, China Industrial Production and
  Retail Sales, UK Retail Sales, US Housing Starts and Building Permits.

Monday

Christopher Waller
is a key Fed governor because he’s been a “leading indicator” for changes in
Fed’s policy. He recently mentioned that they could go faster on rate cuts if
the labour market data worsened, or if the inflation data continued to come in
softer than everybody expected.

He also added that
a fresh pickup in inflation could also cause the Fed to pause its cutting. The
market is now almost perfectly in line with the Fed’s latest projections, so if
he brushes aside the recent inflation data, that will likely boost the risk
sentiment.

Tuesday

The UK Labour
Market report is expected to show 250K jobs added in the three months to August
vs. 265K to July, and the Unemployment Rate to remain unchanged at 4.1%. The
Average Weekly Earning including Bonus is expected at 3.8% vs. 4.0% prior,
while the ex-Bonus figure is seen at 4.9% vs. 5.1% prior.

The market is
pricing 36 bps of easing by year-end with an 80% chance of a 25 bps cut in
November. BoE’s Governor Bailey recently caused a selloff in the GBP when he
mentioned that the central bank could become more aggressive on rate cuts,
while BoE’s Chief Economist Pill cautioned against the risk of cutting rates
either too far or too fast.

We will likely
need an awful report to get the market to fully price in a back-to-back cut in
December, but it’s unlikely that we will see a 50 bps cut being priced for
November unless the CPI data shows a big downside surprise as well.

The Canadian CPI
Y/Y is expected at 1.8% vs. 2.0% prior, while the M/M figure is seen at -0.2%
vs. -0.2% prior. The underlying inflation measures are more important for the
BoC, so that’s what the market will be focused on. The Trimmed Mean CPI Y/Y is
expected at 2.5% vs. 2.4% prior, while the Median CPI Y/Y is seen at 2.3% vs.
2.3% prior.

The last 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 scaled
back those probabilities following the surprisingly good Canadian Retail
Sales, the GDP report and the US NFP report. The expectations for a 50 bps
cut picked up again though and the probability was standing around 52% right
before the Canadian Labour Market report on Friday.

Those probabilities dropped to 36% following
a strong report but got back around 50% after the weak BoC Business Outlook Survey. The market is
clearly pushing for that 50 bps cut at any sign of weakness. Therefore, we can
expect the market to increase the chances of a 50 bps cut in case we get a soft
CPI report.

The New Zealand Q3
CPI Y/Y is expected at 2.3% vs. 3.3% prior, while the Q/Q figure is seen at
0.7% vs. 0.4% prior.

The core inflation
rate in New Zealand fell inside the 1-3% target band in the last report, and
given the unemployment rate at the highest level since 2021 and high frequency
indicators continuing to show weakness, the RBNZ cut by 50 bps at the last meeting.

The market expects
another 50 bps cut at the upcoming meeting in November and a total of 152 bps
of easing by the end of 2025.

Wednesday

The UK CPI Y/Y is
expected at 1.9% vs. 2.2% prior, while the M/M measure is seen at 0.2% vs. 0.3%
prior. The Core CPI Y/Y is expected at 3.4% vs. 3.6% prior, while the M/M
figure is seen at 0.3% vs. 0.4% prior.

A hot report won’t
change much in terms of market pricing as just one cut is fully priced in by
the end of the year anyway. A soft report though will likely see the market
looking for another 25 bps cut in December, and a very soft one for a 50 bps
cut in November.

Thursday

The Australian
Labour Market report is expected to show 25K jobs added in September vs. 47.5K
in August and the Unemployment Rate to remain unchanged at 4.2%. The report is
unlikely to change anything for the RBA which continues to maintain its hawkish
stance.

The ECB is
expected to cut interest rates by 25 bps and bring the policy rate to 3.25%.
The central bank wasn’t looking for a back-to-back cut in October but following
the bleak PMIs at the end of September, the market rushed to price in such a
move which was then solidified following the benign Eurozone CPI and dovish
comments from ECB members. The market expects the ECB to deliver another
25 bps cut in December and four more in 2025.

The US Jobless
Claims continues to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
after rising sustainably during the summer improved considerably lately.

Last week though,
the data surprised to the upside with both Initial and Continuing Claims
spiking to the cycle highs. The spike was attributed to distortions from
Hurricane Helene and the Boeing strike.

This week Initial
Claims are expected at 255K vs. 258K prior, while Continuing Claims are seen at
1870K vs. 1861K prior.

The US Retail
Sales M/M are expected at 0.3% vs. 0.1% prior, while the ex-Autos M/M measure
is seen at 0.2% vs. 0.1% prior. The focus will be on the Control Group figure
which is expected at 0.3% vs. 0.3% prior.

Consumer spending
has been stable which is something you would expect given the positive real
wage growth and resilient labour market. Retail sales data is generally a
market moving release but it’s volatile and most of the time the initial moves
are faded.

The Y/Y figure
smooths the noise but in recent recessions, retail sales haven’t been a leading
indicator, on the contrary, retail sales showed weakness when the recessions
were well underway. Therefore, the data shouldn’t influence the market’s
pricing much.

Friday

The Japanese Core
CPI Y/Y is expected to drop to 2.3% vs. 2.8% prior. The Tokyo CPI is seen as a
leading indicator for National CPI, so it’s generally more important for the
market than the National figure.

We had a dovish
turn from Governor Ueda in September caused by the appreciation of the JPY and
the Fed’s 50 bps cut. More recently, there’s been a more neutral language
coming from some BoJ officials and PM Ishiba, but the data doesn’t really point
to a near term hike though.

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

• Sun: Chinese Inflation
• Mon: OPEC MOMR, Chinese Trade Balance (Sep), Canada market holiday
• Tue: SARB Announcement, IEA OMR, UK Jobs Report (Aug/Sep), Swedish CPIF (Sep), German ZEW (Oct), Canadian CPI (Sep), New Zealand CPI (Q3)
• Wed: Bank of Indonesia Announcement, UK Inflation (Sep)
• Thu: ECB Announcement, CBRT Announcement, European Council Meeting, Australian Jobs Report (Sep), EZ Final CPI (Sep), US Retail Sales (Sep)
• Fri: European Council Meeting, Japanese CPI (Sep), Chinese GDP (Q3), UK Retail Sales (Sep), US Building Permits (Sep)

Chinese Inflation (Sun):

Chinese CPI Y/Y for September is expected to remain at 0.6% (prev. 0.6% in August), while PPI Y/Y is seen at -2.5% (prev. -1.8%) after the August figures both missed forecasts last month. Markets will be eyeing the data for further signs of domestic demand red flags. That being said, it’s worth keeping in mind the bazooka of stimulus announced by China’s PBoC at the end of September, although this was followed by a rather underwhelming fiscal announcement, and it is difficult to determine when the passthrough will be felt. The latest Caixin PMI data cannot be confidently used as a proxy with the survey period (12-20 September) falls before the stimulus announcements (24 September). Nonetheless, analysts at Pantheon Macroeconomics expect CPI Y/Y to cool to 0.5% in September and PPI decelerating to -2.3%. The desk suggests “Core [consumer price] inflation is likely to have slowed further as domestic demand remains soft and competition between suppliers was intense”, while for PPI the desk says “the price of energy and some raw materials softened. Overcapacity will continue to weigh on factory gate prices.”

Chinese Trade Balance (Mon):

Trade balance for September is forecast to narrow to USD 89.80bln (prev. USD 91.02bln) with exports seen moderating to +6.0% Y/Y (prev. 8.7% Y/Y) but imports seen rising 0.9% Y/Y (prev. 0.5%). A couple of major developments last month could impact the data. Firstly, the data encapsulates the period in the run-up to the Golden Week Holiday (Oct 1-7th), while another factor is the trade frictions with the EU after the bloc imposed tariffs on Chinese-made EVs. Nonetheless, signs of weak domestic demand will be eyed, with Goldman Sachs flagging cautious spending during the Golden Week Holidays – “Low tourism spending per head and subdued services prices highlighted still weak domestic demand and continued consumption downgrading”, the desk said.

SARB Announcement (Tue):

At the prior meeting in September, the SARB cut rates by 25bps from 8.25% to 8.00%, the first time in four years. Governor Kganyago has maintained that the interest rates cutting cycle in the country will continue to be dictated by „domestic idiosyncrasies“ in spite of emerging markets central banks cutting rates. On the decision, Nedbank economist da Silva said the domestic economy fared slightly better in Q2 ’24, with easing structural constraints, falling inflation, and rising real incomes supporting production and consumption. He added that “the main boost came from a rebound in domestic demand, which offset a renewed deterioration in the country’s net export position.” Nonetheless, Da Silva stated „Headline inflation is forecast to remain around the Reserve Bank’s 4.5% target over the next 2 years, creating space for further monetary easing”. The desk expects the repo rate to decline from 8% currently to 7.75% by end-2024 and 7% by end-2025.

UK Jobs Report (Tue):

Expectations are for the unemployment rate to remain at the 4.1% mark in August. More pertinently for the BoE, ex-bonus average earnings is seen easing slightly to 5.0% from 5.1%. As a reminder, the prior release saw a downtick in the unemployment rate to 4.1% from 4.2%, employment change jumped to 265k (strongest 3M print since May 2022) from 97k, whilst headline earnings growth pulled back to 4.0% from 4.6%. For the upcoming report, Pantheon Macroeconomics notes that “September business surveys suggest a slowdown in output and hiring because of uncertainty about potential tax hikes in the October 30 Budget”. As such, the consultancy looks for PAYE payrolls to be unchanged on a M/M basis. From a pay perspective, PM notes that it places more weight on the BoE’s DMP report and Indeed wage tracker which have pointed to “stubbornly strong gains”. Accordingly, the desk suggests “AWE is due for a strong rebound in August, after seemingly exaggerating the slowdown in pay growth over the past few months”. From a policy perspective, indicators heading in are for a rebound in the wage metrics which if realised would factor in favour of the hawkish contingent of the MPC who think the pace of normalisation needs to be gradual. However, newswire consensus has stated looking for a slight moderation in wages which speaks to the dovish-contingent and provide evidence in support of Governor Bailey’s inflation-conditional guidance that they could be a bit more aggressive on easing (see UK inflation section for more).

Canada CPI (Tue):

Towards the end of September, Bank of Canada Governor Macklem said that officials are pleased to see inflation back at 2%, and policy now had to ‘stick the landing’. He said that with the continued progress seen on inflation, it was reasonable to expect further reductions in its policy rate, but the timing and pace will be determined by incoming data and policymakers’ assessments of what those data mean for future inflation. That said, Macklem still wants to see core inflation ease from current levels a little above 2%. Macklem had suggested that larger cuts are possible if the economy and CPI is weaker, so a soft CPI could perhaps bolster calls for a 50bp rate cut. Money markets were pricing in a near coin flip for 50 or 25 bps before the latest labour market report, however a very strong report saw 50bp rate cut bets unwind. Markets currently price in 34bps of easing, which implies a 36% probability of a 50bps rate cut.

New Zealand CPI (Tue):

CPI Y/Y is expected to have cooled 2.3% in Q3 Y/Y (prev. 3.3%) – in line with the RBNZ forecast from its August while the Q/Q metric is seen hotter at 0.7% (prev. 0.4%). Westpac notes that this quarter’s inflation has been driven by large increases in local council rates, insurance premiums, and food prices, while weaker fuel prices and cheaper imported goods have helped to offset these rises. Westpac’s forecast is slightly lower, at 2.2% annually and 0.7% quarterly – slightly below the RBNZ’s August Monetary Policy Statement forecasts of 2.3% Y/Y and 0.8% Q/Q, reflecting the fall in oil prices during the period.

UK Inflation (Wed):

Expectations are for the headline Y/Y to ease to 1.9% from 2.2% with the core pace also seen moderating though by a lesser extent to 3.5% from 3.6%. As a reminder, the prior release saw headline Y/Y CPI hold steady at 2.2%, core rise to 3.6% from 3.3% and the all-important services metric jump to 5.6% from 5.2% on account of unfavourable base effects and certain volatile sectors. For the upcoming report, the expected decline to 1.9% for the headline takes it back below the 2.0% target mark (after being above for two consecutive readings), though the BoE’s MPR forecast is for a 2.1% reading. Investec believes that the reading will come in below the BoE’s target and print at 1.7%, weighed on by declines in fuel prices for the month; though, recent price action in the energy space and ongoing geopolitical tensions/uncertainty means it is hard to say with conviction if this will be sustained or not. From a policy perspective, this will be the final inflation report before the November policy announcement and MPR. On which, markets assign a circa 80% chance of a 25bps cut and therefore there is still some room for a dovish repricing. However, a hot release would provide ammo to the more cautious voices on the MPC and could set markets up for another split vote next month. As a reminder, at the start of the month BoE’s Bailey said they could possibly be a “bit more aggressive” in cutting rates, provided that inflation news continues to be good.

ECB Announcement (Thu):

Expectations are for the ECB to lower the deposit rate by 25bps from 3.5% to 3.25%, according to 68/75 surveyed by Reuters. Markets price such an outcome at 98%. In the wake of the September meeting, markets assigned just a 28% chance of an October rate cut and were of the view that the ECB would opt to lower rates at meetings that are accompanied by macro projections, whilst pausing at those that do not contain them (as a reminder, ECB cut in June, paused in July and cut in September). Furthermore, source reporting via Reuters stated that an October rate cut was unlikely as a move before December would require “exceptional negative growth surprises”. Fast forward to now and the playbook put forward by the ECB and absorbed by markets has been disregarded. The first wave of repricing for October was driven by the September PMI metrics which saw the EZ-wide manufacturing slip further into contractionary territory, services decline, dragging the composite into contractionary territory; its largest decline in 15 months. Thereafter, inflation metrics for September added to the dovishness with headline HICP slipping below target to 1.8% from 2.2%, albeit super-core inflation only slipped to 2.7% from 2.8% and services inflation stands at a still-lofty 4%. As such, the market raced to price in an October rate cut. ECB speak has largely endorsed such a move with even some of the hawks on the GC open to such a move. That being said, from an alternative viewpoint, ING suggests that a rate cut is not a done deal. The desk cites the fact that soft inflation and growth outturns were already baked into the ECB’s forecasts, whilst comments from Germany’s Schnabel stated that, whilst the bank cannot ignore headwinds to growth, it cannot do much to solve structural weaknesses. Looking beyond October, a further 25bps cut is near-enough fully priced in for December with four further cuts expected in 2025.

CBRT Announcement (Thu):

The Turkish Central Bank is expected to maintain its main Weekly Repo Rate at 50%, with the first rate cut likely to come in December or January, as per a Reuters poll. Six out of ten economists forecast a December cut, while the remaining four see it happening in January. This represents a more hawkish shift compared to the September poll, where most predicted a cut in October or November. The initial rate reduction is anticipated to be 250bps, bringing the rate down to 47.5%. The delay comes after higher-than-expected inflation in September, despite an annual rate drop to 49.4%. Analysts cite persistent inflation risks and a cautious approach from the CBRT. The CBRT Governor, at the start of October, cautioned that the September inflation data from the statistical institute was well above their expectations and “upward risks to inflation are clear.” As a reminder, at the prior meeting, The Turkish Central Bank left its Weekly Repo Rate at 50% as widely expected by analysts heading into the meeting. The CBRT however dropped its tightening bias, in which it noted „monetary policy tools will be used effectively“, omitting the prior line that „monetary policy stance will be tightened“.

Australian Jobs Report (Thu):

There are currently no market forecasts for the data, which last month saw Employment Change at 47.5k, Unemployment Rate at 4.2%, and Participation Rate at 67.1%. The Australian Employment Change topped forecasts at the time but was solely fuelled by Part-Time jobs. Westpac expects Employment Change in September to rise by 40k, below the 47.5k in August, though still above trend. The participation rate and unemployment rate are both forecast by the bank to remain unchanged at 67.1% and 4.2%, respectively. August’s increase in employment was driven solely by part-time jobs, and Westpac suggests a continued tight but gradually balancing labour market as labour supply rises.

US Retail Sales (Thu):

US Retail Sales are expected to rise 0.3% M/M in September, accelerating from the 0.1% in August. Meanwhile, Core Retail Sales are expected to rise by 0.1%, maintaining the 0.1% pace seen in August. Bank of America’s monthly consumer checkpoint data points towards “modest forward momentum”; the bank’s aggregated credit and debit card spending per household was -0.9% Y/Y in September (prev. +0.9% Y/Y); seasonally adjusted spending was up +0.6% M/M. BofA writes “homeowners currently have a historically large share of equity in their homes, providing potential upside to spending if they tap this through a home equity line of credit, but home equity is not evenly distributed and a significant share of HELOC borrowing appears on our estimates associated with debt consolidation, so the impact on spending should not be exaggerated.” It adds that durable goods spending has been “robust,” but it finds that the share of higher-value durable transactions in its internal data has declined, with a corresponding rise in some services categories. “This suggests consumers may be prioritising value categories and experiences over big-ticket purchases.” Ahead, as we approach the holiday season, Adobe expects US online sales to hit USD 240.8bln in November and December combined (+8.4% y/Y). Shopping on mobile devices is expected to hit a new milestone, contributing a record USD 128.1bln (+12.8% y/Y); that would represent a 53.2% share of online spend this season (versus desktop shopping). Meanwhile, “Cyber Week” (the 5-day period including Thanksgiving, Black Friday and Cyber Monday) is expected to drive USD 40.6bln in online spend (+7.0% y/Y), representing 16.9% of the overall holiday season. Adobe expects Cyber Monday will remain the season’s and year’s biggest shopping day, driving a record USD 13.2bln in spend (+6.1% y/Y); Black Friday is expected at USD 10.8bln (+9.9% Y/Y), and Thanksgiving Day USD 6.1bln (+8.7% Y/Y), outpacing Cyber Monday in annual growth as consumers embrace earlier deals promoted by US retailers. Adobe says strong discounts of up to 30% are expected to encourage shoppers to “trade up” in categories like electronics and appliances, leading to over USD 2bln in additional spending this holiday season.

Japanese CPI (Fri):

Core CPI Y/Y is expected to cool to 2.3% in September from 2.8% in August. Tokyo’s Core CPI, often used as a proxy for nationwide inflation, rose 2.0% Y/Y in September, matching the BoJ’s 2% target and market expectations, but down from 2.4% in August due to the resumption of government utility subsidies. A separate index excluding fresh food and fuel costs increased 1.6%, unchanged from August. Analysts will focus on whether service price hikes accelerate in October, with companies adjusting for higher labour costs amid rising wages. Despite BoJ Governor Ueda’s recent cautious rhetoric, desks suggest economic fundamentals, including steady wage growth and resilient domestic spending, are laying the groundwork for possible tightening in December or January.

Chinese GDP (Fri):

Q3 GDP Y/Y is forecast to cool slightly to 4.6% from 4.7% in Q2. Goldman Sachs and Citigroup have both recently revised their full-year 2024 growth projections down to 4.7%, citing weaker-than-expected industrial output and retail sales in August. China’s industrial output slowed to 4.5% Y/Y in August, down from 5.1% in July, while retail sales growth also decelerated to 2.1% from 2.7%. Analysts are closely watching whether the recent stimulus measures from China’s PBoC, introduced in late September, will have any tangible effect on economic activity in Q4. However, the subdued fiscal announcement following the monetary stimulus leaves uncertainty around the timing and effectiveness of the policy passthrough. The risk of missing the government’s full-year target of „around 5%“ growth has increased, amplifying calls for additional demand-side measures to bolster the recovery.

UK Retail Sales (Fri):

Expectations are for a M/M reading of 0.0%, sharply down from the 1.0% prior and with a forecast range which bottoms out at -0.4%. A reading which is expected to be an unwinding of recent strength, which was driven by real-wage gains for households, and as consumers await a potentially significant fiscal update at the end of October. In terms of recent retail indicators, BRC Retail Sales for September Y/Y rose to 1.7% from 0.8% with the accompanying report noting “retail sales saw the strongest growth in six months as non-food performed better than expected… ongoing concerns of consumers about the financial outlook kept demand low for big ticket items such as furniture and white goods”. Elsewhere, Barclaycard said UK September consumer spending rose 1.2% Y/Y vs. prev. 1.0% growth in August and it cited a boost from discretionary spending but noted that essential spending fell 1.7% which was the steepest drop since April 2020. From a policy perspective, the release will likely do little to shape expectations for BoE easing with the MPC more focused on services inflation and real wage growth.

This article originally appeared on Newsquawk.

This article was written by Newsquawk Analysis at www.forexlive.com.

Ishiba kicked off his term as PM by saying Japan’s economy was not ready for further Bank of Japan rate hikes.

He has back peddled, and did so again over the weekend:

• „It’s important to avoid vocally intervening“ in monetary policy affairs
• Or even appear as if he was doing so
• „the Bank of Japan makes an individual decision on policy“
• „I believe the BOJ’s governor and staff have a strong sense of responsibility over achieving price stability“

Ishiba threw in a few comments on the economy though:

• consumption needs lifting to help achieve a sustained departure from deflation
• real wages need to boosted

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

China’s consumer inflation rate fell in September.

Producer price deflation deepened.

This screenshot is from the free ForexLive calendar.

China keep pumping out stimulus, Saturday:

• China offers few details on stimulus in Saturday’s press conference

Sunday brought confirmation of cuts to housing loans:

• Four of China’s biggest state-owned banks confirm mortgage rate cuts, beginning October 25

Meanwhile, as you can see above, consumer prices are still struggling to hold out of deflation territory.

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

Four of the biggest state-owned banks in China confirmed over the weekend that cuts to existing mortgage rates will start on October 25.

We knew this was coming :

• PBOC tells banks to lower mortgage rates before October 31

The People’s Bank of China said cut ‚em by no less than 30 basis points (bps) below the Loan Prime Rate (LPR). The current 5-year LPR, used as a reference for long-term credit including mortgages, is 3.85%. Thus mortgage rates will fall to 3.55%.

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

• The S&P index closed at a new record level for the 45th time this year.
• The Dow industrial average also closed at a record today.
• The NASDAQ index closed higher today and is within 1.66% of it’s all time record close reached back on July 10 at 18647.45.
• The small-cap Russell 2000 was the biggest gainer today with a search of 2.10%. It is within 1.35% of it’s all time high close at 2263.67.

A snapshot of the closing levels currently shows:

• Dow industrial average +409.74 points or 0.97% at 42863.86.
• S&P index up 34.98 points or 0.61% have 5815.03.
• NASDAQ index up 60.89 points or 0.33% at 18342.94.
• Russell 2000 up 45.99 points or 2.10% at 2234.41.

For the trading week:

• Dow industrial average +1.21%
• S&P index up 1.11%
• NASDAQ index +1.13%
• Russell 2000 up 0.97%

Some big winners this week:

• Trump Media & Technology Group: +53.21%
• Uber Tech: +16.14%
• Super Micro Computer: +15.89%
• Robinhood Markets: +14.77%
• CrowdStrike Holdings: +9.57%
• Celsius: +9.02%
• Palo Alto Networks: +9.01%
• Palantir: +8.72%
• Snowflake: +8.12%
• Arm: +8.01%
• NVIDIA: +7.91%
• SoFi Technologies: +7.39%
• Wells Fargo & Co: +7.06%

Some big losers this week:

• Raytheon: -17.17%
• Tesla: -12.95%
• First Solar: -8.51%
• Nio A ADR: -7.89%
• Tencent ADR: -6.65%
• Alibaba ADR: -3.88%
• General Mills: -3.79%
• Worthington Industries: -3.68%
• ProShares UltraPro Short QQQ: -3.50%
• iShares Global Clean Energy: -3.18%
• Moderna: -3.17%
• Dollar Tree: -2.76%
• GameStop Corp: -2.76%

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

• Canada September employment change +46.7K vs +27.0K expected
• US PPI final demand August YoY 1.8% vs 1.6% est. Ex Food and energy 2.8% vs 2.7% est.
• US October UMich prelim consumer sentiment 68.9 vs 70.8 expected
• Bank of Canada business outlook survey says „demand is weak“
• Fed’s Logan: Less-restrictive policy will still cool inflation
• Baker Hughes oil rig count up +2 to 481
• Tesla shares fall 8% after robotaxi event panned for lack of details

Markets:

• Gold up $26 to $2655
• US 10-year yields down 1 bps to 4.08%
• WTI crude down 30 cents to $75.56
• NZD leads, JPY lags
• S&P 500 up 0.7%, touches fresh record

Friday turned into a classic risk-on day but it’s not entirely clear why. Stock futures were negative and the US dollar was steady in pre-market trading but big bids hit at the US equity open and FX followed the same pattern, with Treasury yields falling led by the front end.

Data was mixed with PPI following CPI slightly higher while UMich sentiment missed to the downside slightly. A more-likely culprit was bank earnings, including comments from J.P. Morgan that consumer spending was steady and not deteriorating. Earnings at JPM and Wells Fargo were also good, boosting financial shares broadly.

There is anticipation of announcements of further Chinese fiscal stimulus at press events on Saturday and Monday so that could dictate early-week trading.

Overall moves were small but the yen was a notable underperformer. That’s most-likely a product of the risk trade but there could also be some position squaring as we count down to the US and Japanese elections. The S&P 500 rose to record intraday and closing highs with small caps particularly strong today and the Russell 2000 up 2%.

The loone was a notable underperformer once again. The session high came before the strong jobs data and that led to a 50 pip decline initially. However that drop didn’t entirely last as buyers stepped in quickly and then more-strongly after the BOC business outlook survey. The Oct 23 BOC decision is likely to become a litmus test for global central bank easing. Current pricing is 50/50 for 25 bps or 50 bps. The loonie has now declined for eight straight days, which is ominous given the backdrop in oil and stocks in that time period.

Note that US bonds and Canadian markets are closed Monday for a holiday.

Have a great weekend.

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

• Believes the neutral rate is higher than it used to be in the past
• The Funds rate is high relative to where inflation is currently
• Always want to keep monetary policy moving to where the economy is going.
• There is room to go in nominal funds rate before reaching the neutral rate.
• Fed has to be more forward-looking than the market
• I don’t think that much has changed in the economy
• A Fed policy maker time horizon is more longer term
• I would cut rates by 25 bps. A stop-and-go is not a good look for the Fed.
• The recent data has not changed the medium-term economic outlook

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

As the clock ticks to the election, expect more and more promises to sway the last voters.

The Democrat nominee Harris is now promising Republican representation in her cabinet.

Equal time to GOP nominee Trump, some of his recent promises:

• Interest on car loans will be fully tax-deductible.
• Intends to invoke the six-year renegotiation provision of the US-Mexico-Canada Agreement (USMCA).
• No Chinese EVs will ever drive on American roads
• Proposes a “detailed plan to save the American auto industry.”
• Vows to end double taxation for Americans living abroad. He is encouraging expats to register to vote.
• Promises to eliminate taxes on tips, Social Security benefits, and overtime pay.
• Proposes lifting the $10,000 cap on state and local tax deductions.
• Plans to extend individual income and estate tax provisions of the 2017 tax cuts law.

The problem with the interest on car loans is it applies to those that itemize deductions. Most American’s do not itemize deductions but take the lump sum amount each year.

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

The NZDUSD traded above and below the 100-day MA this week but above the 200-day MA (green line) into the mid-week RBNZ rate decision. The central bank cut rates by 50 basis points and that sent the pair below the 61.8% but buyers came in against the 61.8% retracement. The subsequent bounce off the low on Wednesday saw the price move back to the 200-day MA where sellers leaned, putting a lid on the pair.

There was one last move lower which took out the 61.8% and the low for the week, but quickly failed.

That led to a run back higher and back between, the 200-day MA at 0.6095, and the 100 day MA above at 0.61215. That is where the price is now.

Coming into the this week, the 100 and 200-day moving averages were key levels on the downside. As we end the week and look to next week, the same 100/200 day MAs will be key levels once again.

If the price moves above the 100-day MA on the topside, I would expect more upside probing with traders targeting 0.6167 to 0.61795 as the next target area. Move above and there will be more upside momentum.

Conversely, if the 200-day MA is broken on the downside, I woudl expect more downside mometum with traders once again targeting the 61.8% retracement at 0.60509. Move below and there should be more downside momentum.

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