Strong US Growth, a Weaker Dollar and Tech Troubles
Good morning, For this week, US data releases will be one hour earlier at 12.30 or 14.00 london time due to the clock changes.
In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.
US data came and went with little fuss, at least initially. Core PCE was pretty much in line while GDP came in at 3.4%, above the 3.2% expected and well above the previous 2.2% reading. All in all a strong set of numbers that were boosted by Hassett saying US is heading towards 4% GDP, adding that Fed may well need to raise rates if October inflation is high. You’d imagine this would all lead to a stronger US dollar, instead we have seen USD weaken, with GBPUSD now 1.3415 and EURUSD around 1.1200. Once again GBP is the major beneficiary, with GBPEUR now up to 1.1980, surpassing May 2025 highs.
The softer USD has pushed USDCAD lower, currently 1.3965 which is good for anyone who bought one week 1.4025 put I mentioned a couple of days ago. Probably time to buy some spot against it, perhaps 50% which makes it effectively a risk free, cost free trade. Canadian GDP out this afternoon is unlikely to surprise too much to the upside.
BoJ kept rates unchanged overnight as expected but the softer US dollar and BoJ Dec rate rise talk has helped take USDJPY to the 157.20 area although the stronger GBP has lifted GBPJPY, now around 211.00.
Lagarde announced she would be leaving the ECB after the February meeting, before the end of her term. It has been suggested that a successor will be found before year-end, early front runners are de Cos and Knot. Meanwhile ECB did leave rates unchanged as expected although the market is pricing in a Dec rate rise with a pause to follow. Lagarde said that inflation risks are to the upside due to higher energy prices although they are yet to really see second round effects. She also warned of downside risks to growth.
Equity markets are lower after a bout of tech-firm selling with the likes of Google trading sharply lower from $325 to $285, Amazon slipped from $255 to $245 or so and Intel dropped over 20% in after-hours trading on much weaker forecasts. South Korea’s tech-heavy Kospi index fell dropped some 8% from Thursday’s high near 6100 to 5600 before recovering slightly into the close. Crypto markets are reeling after news of an unprecedented security breach at Binance valued at some £5bn with North Korea reportedly high on the list of suspects. Bitcoin dropped from almost $82,000 to $76,500.
In sport, England finally won an ODI by beating Sri Lanka after posting a whopping 386/5, with Sri Lanka falling short of the target by 55 runs. England remain at the bottom of the tri-series table with just one win from four although there have certainly been some memorable matches.
Weekend football sees some decent matches including Man City v Brighton, just a few days after their League Cup match. Spurs look to make it three wins out of three against Palace, but the pick of the games must be Chelsea v Man Utd Saturday and the big one, Liverpool v Arsenal on Sunday. By Sunday we may well have the youngest ever F1 drivers champion if Antonelli can get the couple of points he needs at the Mexicna Grand Prix.
We have a reasonably busy calendar today but eyes are likely to be more on equities, crypto and bond yields rather than currencies. Next week is suddenly November which brings some decent events such as rate announcements from BoE and RBA, EU inflation and retail sales, NZ employment, and US data that includes ISM PMIs and the full range of employment numbers that finishes with the nonfarm payrolls on Friday. We also have the small matter of the US midterms elections on Tuesday which then opens the door for possible military action in Iran.
Have a great day, and a great weekend as and when it comes…
- 09.00 German GDP
- 10.00 EU GDP, unemployment
- 12.30 CAD GDP
- 12.30 US employment cost index
- 13.00 Germnan HICP
- 13.45 US Chicago PMI
- 16.00 Feds Daly speaks
- 16.10 ECBs Lane speaks
- 16.30 Feds Musalem speaks