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It would have probably been wise not to comment at all rather than say “we do not comment on market movements”.

He also said this:

• The budget has been about restoring fiscal stability, there are two new robust fiscal rules
• Tough choices were necessary to fix the foundations of UK economy

UK 10-year yields have cooled a bit after hitting a high of 4.53% and are down to 4.49%, but still up 14 bps on the day.

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

Has the market finally remembered that an election is coming?

‘Sell everything’ is the mantra today as market participants head for the sidelines in stocks, bonds and precious metals. Gold is getting hit hard today after a relentless rally for three months. It’s down $52 to $2734, or 1.8%.

Given how strong gold has been, that barely eclipses the past two days of gains and isn’t threatening any kind of trendline.

The best outcome for gold on election day would be some kind of uncertainty, followed by a deficit-ballooning Congressional sweep by either party. The caveat to that is that it could cause a jump in yields, which should boost the dollar. That said, dollar strength has been no impediment to gold gains recently.

Moreover, I imagine Trump (and his tariffs) are better for gold than the alternative.

Technically, I expect bids at $2700.

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

It will be three months before we get any real indications on Q4 and this number is mostly a placeholder. More-pressing in the next few weeks will be indications on how Q3 GDP will be revised.

That said, CIBC made an argument that US potential (non-inflationary) growth is now 3%.

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

Politico is out with a new poll and it once again show a very tight race that comes down to Pennsylvania, which is near deadlocked.

Pennsylvania: Harris 48%; Trump 47%

Michigan: Harris 49%; Trump 45%

North Carolina: Trump 47%; Harris 45%

New Hampshire: Harris 50%; Trump 43%

Yesterday, we saw bonds sell off and the US dollar rally late in the day after a Quinnipac poll showed Trump making progress in that state. The poll was particularly notable because the same pollster had previously shown him trailing.

Some people in financial markets appear to be making bets on the election but the wiser ones are waiting for the dust to settle. Vanderbilt University political scientist Josh Clinton illustrates how polling in the US is difficult. Pollsters underestimated Trump before and have tried to improve their methods but it ultimately comes down to a series of assumptions.

” Simple and defensible decisions by pollsters can drastically change the reported margin between Harris and Trump,” he writes, showing that national margins could change from Harris +0.9% to +9% based on those.

“One way to address this is by using voters in past elections as a
benchmark. But which election? The 2022 midterm election was most
recent, but midterm voters differ from presidential voters. The 2020
election could be a better choice, but perhaps the pandemic made it
atypical. Maybe 2016 is better.”

You get the idea and when you layer on things like likely voters, hidden party association and asking how people voted last time, you end up with a milt-variate picture that’s far wider than the simple numbers from polls indicate.

What’s the takeaway?

“We would all do better to temper our expectations about preelection
polls. It’s impossible to ensure that the polls will reliably predict
close races given the number of decisions that pollsters have to make.
And it’s often hard for consumers of polls to know how much the results
reflect the opinions of the voters or the pollsters.”

Don’t be surprised if there’s a big polling miss once again on election night, in one direction or the other. Let’s at least hope that makes for a clear result.

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

The pound has finally cracked.

It was able to ignore the run up in gilt yields for a time but we may have hit some kind of breaking point now. UK 10s are up 16 bps to 4.51%, which is the highest since Nov 2023.

The pound didn’t care until it did…in the past few minutes.

What I worry about is that Treasuries could also blow up. There is a strong consensus (and with good reason) that if we get a Congressional sweep in either direction it will lead to even-larger US deficits — whether that’s due to more spending or tax cuts. The US is already running deficits at 7% of GDP and Paul Tudor-Jones last week was highlighting that the Trump tax cuts need to expire.

Within that, today’s US data also highlighted a healthy US economy and argue that the Fed doesn’t need to cut as much and might even be facing new inflationary pressures, particularly if oil prices rebound.

Finally, I’m cautious of reading too much into any of these moves as it’s month-end and we’re just days away from the US election. For most market participants — including me — this is not a time to be making big bets, or any bets at all.

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

There is a bit of a ‘sell everything’ mode underway and the S&P 500 is down more than 1% now and has broken last week’s low.

The bond market isn’t helping as UK gilt yields are now up 15 bps in what could be a preview of what’s to come for Treasuries if we get a Congressional sweep. US 10s are partially along for the ride, up 6 bps to 4.32%. The pound is now getting hit as well.

In stocks though, it’s the AI trade that’s under pressure, with Microsoft down 5% and Nvidia down 4%.

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

Memories of the downfall of Liz Truss are being resurrected as the UK bond market recoils after Labour’s first budget in 15 years.

UK 10-year gilt yields are up 12 bps to 4.47%, which is the highest since November 2023. It was a spike earlier in 2023 to 4.75% that pushed out Truss and her Chancellor. That said, I’ve always maintained that was more of a perfect storm that a pure reaction to the budget.

However in politics, perception can be reality.

Right now, the pound isn’t doing much but it climbed in Asia and is up 25 pips on the day to 1.2988. Given the breakout in yields, we could see this spilling over into the currency. Normally higher yields are a positive but that flips when there are real fiscal question. I’m not ready to go there yet as there are also some positives around growth and a hawkish central bank in place but look for outsized responses to UK data in the next month.

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

Happy Halloween.

Unless you’re long stocks, particularly tech stocks that reported yesterday. Shares of Meta are down 1.5% and Microsoft nearly 4% after reporting late yesterday.

The market is also rattled by Super Micro, which is down another 5% yesterday after its auditor quit yesterday. It’s a big customer for Nvidia, which is down 1.2% pre-market and fading back from the marginal record highs.

I expect there is also some election angst in the market and today’s economic data highlighted a Federal Reserve path that includes fewer cuts. Pricing is now at 3.66% for next December, about 75 bps above where it was at the lows.

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

• Prior quarter 0.9%
• employment cost index Q3 0.8% versus 0.9% estimae
• employment wages QoQ 0.8% versus 0.9% last quarter
• employment benefits 0.8% versus 1.0% last quarter

HIGHLIGHTS and DETAILS from the BLS

• Civilian workers’ compensation costs rose by 0.8% (seasonally adjusted) from June to September 2024.
• Over the 12-month period ending in September 2024, civilian workers’ compensation costs increased 3.9%, down from 4.3% in September 2023. (SLOWING)
• Wages and salaries for civilian workers rose 3.9% over the past year, compared to a 4.6% increase in the previous year. (SLOWING)
• Benefit costs for civilian workers rose 3.7% over the year, compared to 4.1% in September 2023. (SLOWING)
• Private industry workers’ compensation costs increased 3.6% over the year, down from 4.3% in September 2023. (SLOWING)
• Wages and salaries in private industry rose 3.8%, compared to 4.5% the prior year. (SLOWING)
• Benefit costs in private industry rose 3.3% over the year, compared to 3.9% the previous year. (SLOWING)
• Inflation-adjusted wages and salaries for private industry increased 1.2% over the past 12 months.

Comparing Union to non-union workers.

• Union workers saw a 5.8% rise in compensation costs, while non-union workers saw a 3.4% increase over the year. (Strike impact?)
• Wages for union workers increased 6.4%, compared to 3.6% for non-union workers.
• Benefit costs rose 4.9% for union workers and 3.1% for non-union workers.

Government workers.

• State and local government workers’ compensation costs increased 4.7% over the past year, slightly down from 4.8% in the previous year.
• Wages and salaries for government workers rose 4.6%, and benefit costs increased 4.8% over the year.

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

• Prior was +0.2%
• Advance Sept GDP +0.3% m/m

The advanced Sept number is a nice improvement.

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

• Prior m/m +0.1%
• Unrounded core PCE was +0.254%
• Core PCE +2.7% y/y vs +2.6% expected
• Headline inflation PCE +2.1% y/y vs +2.1% expected (Prior +2.2, revised to +2.3%)
• Deflator +0.2% m/m vs +0.2% expected
• Unrounded +0.175% m/m vs +0.0907% prior

Consumer spending and income for August:

• Personal income +0.3% vs +0.3% expected. Prior month +0.2%
• Personal spending +0.5% vs +0.4% expected. Prior month +0.2% (revised to +0.3%)
• Real personal spending +0.4% vs +0.1% prior (revised to +0.2%)

The unrounded numbers here reveal softer inflation than the headlines, particularly on core m/m, which was very close to being reported as +0.2%. Meanwhile, the consummption numbers were very strong and we got a preview of that in yesterday’s GDP report.

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

• Prior week initial claims 227K revised to 228K
• Initial jobless claims 216K vs 230K estimate
• 4-week MA of initial jobless claims 236.50 versus 238.75K last week
• Prior week continuing claims 1.897M revise to 1.888M
• Continuing claims 1.862M vs 1.885M estimate
• 4-week MA of continuing claims 1.869M vs 1.8585M last week.

The largest increases in initial claims for the week ending October 19 were in Florida (+4,501), Kansas (+304),
Wisconsin (+222), Hawaii (+103), and Idaho (+101), while the largest decreases were in New York (-2,785), North
Carolina (-2,767), California (-2,012), Texas (-1,865), and Georgia (-1,852).

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