Articles

UK Prime Minister Starmer says Brits who get additional income from shares or property don’t count as ‘working people’.

Bloomberg with the report, saying that Starmer is hinting at tax rises on investors.

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The UK is in dire fiscal straits, so tax rises are coming one way or another. I could probably say that for just about everywhere.

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

New Zealand ANZ Roy Morgan Consumer Confidence for October 2024 drops to 91.2

• prior 95.1
• fell 4 points in October following three months of improvement

Inflation expectations were unchanged at 3.8%:

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

• US weekly initial jobless claims 227K vs 242K expected
• US October flash S&P Global services PMI 55.3 vs 55.0 expected
• BOE’s Ueda: Recent yen fall driven partly by optimism over US economic outlook
• ECB’s Lane: Disinflation “well on track” to hit target in 2025
• Justin Trudeau says he will lead Liberals into the next election
• KC Fed manufacturing index 0 vs -18 prior
• ECB’s Kazaks: Soft landing story is still there but rebound is not clear
• BOE’s Mann: Economic prospects in the UK remain ‘pretty modest’

Markets:

• Gold up $18 to $2736
• US 10-year yields down 3.4 bps to 4.21%
• S&P 500 up 0.2%
• WTI crude down 27-cents to $70.51
• JPY leads, CAD lags

The US dollar gave back some gains on Thursday as yields slid and equities rebounded from yesterday’s drop. The yen was the big mover as it unwound Wednesday’s large gain. The pair rose as high as 152.82 before sliding to 151.85. The comments from Ueda weren’t a market mover but suggested he’s in no mood to re-evaluate his plans despite the FX moves.

The euro also bounced back after three days of selling in a half-cent move that accelerated late in the day. Shorts may have been taking profits and the comments from Lane didn’t add much to the ECB debate as it’s already clear that there is a consensus that inflation is heading to target at some point in 2025.

Cable also strengthened but wasn’t able to retake 1.3000 and actually gave up a bit of ground in US trading after rising earlier in the day.

USD/CAD remains the laggard as it touched the highest since early August and is flirting with the highs of the year. I spoke with Reuters about the loonie and why it’s struggling.

In contast, AUD and NZD posted modest gains on the day. They were higher but were reeled in as US equities gave back some gains. Earnings remain in focus.

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

Nomura say that if the yen comes under pressure next week after the election japanese authorities could step in with intervention efforts to support the currency.

The first step is verbal intervention. We’ve had some weak comments along these lines already from Japan this week, and some comments just a little less weak. Links to two examples from Thursday (Japan time) are here:

• ForexLive Asia-Pacific FX news wrap: USD/JPY drips a little lower

Nomurs, in brief:

• “The yen seems to be working as an adjustment valve at the moment, to ease everything that is pressuring Japan macro”
• the prospect of intervention will heighten if the yen weakens further after this weekend’s general elections
• weakening could also boost the probability that the Bank of Japan flags a December rate hike at its meeting next week (October 30 – 31)

USD/JPY is off its high from Wednesday:

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If you are curious about the mechanics of intervention and why you should be watching the MoF instead of the BOJ:

• The Ministry of Finance (MOF) in Japan is responsible for formulating foreign exchange policy in the country, while the Bank of Japan (BOJ) is responsible for executing such policies, particularly in terms of FX intervention.
• The MOF can decide to intervene in the FX market if it believes (in the current situation) the yen is too weak. Once the MOF decides to intervene, it gives instructions to the BOJ. The BOJ then conducts operations in the FX market by (in current circumstances) buying yen. The Foreign Exchange Fund Special Account (FEFSA), which falls under the jurisdiction of the MOF, is used for interventions. You will note that in the current situation, where the BOJ would buy yen, they will dip into USD reserves to fund the other side of the trade, buying USD (or other currencies if needed).
• The BOJ’s operations are usually conducted through commercial banks that deal in the foreign exchange market. They may be spot transactions, or forward transactions that are set to occur at a future date. Note that while the MOF has the ultimate authority to decide when to intervene, it does so in close consultation with the BOJ. The BOJ provides expertise and advice on monetary and financial market conditions, which can influence the MOF’s decision. This collaboration reflects the balance between the roles of the two entities: the MOF as the government’s chief financial and economic advisor, and the BOJ as the country’s central bank that maintains stability in the financial system.

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

The Dow industrial average index has been down for 4-consecutive days.

For the S&P index, snapped a three-day losing streak with a move higher today. The NASDAQ index will tire on Monday lower on Tuesday higher on Wednesday and again higher today.

The final numbers are showing:

• Dow industrial average -140.5 points or -0.33% at 42374.36
• S&P index +12.44 points or 0.21% at 5809.86
• NASDAQ index up 138.83 points or 0.76% at 18415.49

The Russell 2000 is up 5.08 points or 0.23% at 2218.92.

With one day left to trade this week, all three indices are still lower on the week.

• Dow industrial average, -2.08%
• S&P index -0.93%
• NASDAQ index -0.40%

All three major indices are working on a six-week winning streak, the longest streak in 2024

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

Tokyo area inflation data is due Friday, Japan time:

• National-level CPI data for this month will follow in about three weeks, it takes longer to gather and collate the national data.
• Tokyo CPI is a sub-index of the national CPI
• It measures the change in prices of goods and services in the Tokyo metropolitan area
• Its considered a leading indicator of national CPI trends because Tokyo is the largest city in Japan and is a major economic hub
• Historically, Tokyo CPI data has been just slightly higher than national Japan CPI data. The cost of living in Tokyo is a touch higher than in most other parts of Japan. Higher rents, for example

I’ve added in a missing ‘expected’, for the headline rate, and also a missing expected for the CSPI (services PPI) due 20 minutes later.

This snapshot from the ForexLive economic data calendar, access it here.

The times in the left-most column are GMT.

The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

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

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

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

Deutche Bank is out with a critical reminder today that the US government is spending far more than it takes in annually.

In 2023:

• Total Outlays (Spending): $6.13 trillion
• Total Receipts (Revenue): $4.44 trillion
• Deficit: $1.69 trillion

To get that back into balance, you need to either 1) raise taxes very much or 2) cut spending drastically. Given that about $900 billion is now interest on debt, the options are perilously limited.

What’s very likely to happen is that this problem is going to be kicked down the road another 4 years. Fourteen years ago, Republican Tea Party members started to take power in the House based almost solely on the idea that deficits need to be cut. Those politicians have only gained power since and yet here we are.

Coming out of the election, there is a very likely scenario where old Tea Party politicians hold the balance of power (I’d argue it’s a near-certainty). The question is: Will they do anything about deficits?

Hedge fund legend Paul Tudor-Jones on CNBC this week said that Trump’s original tax cuts have to expire but I just can’t see that happening. My strong suspicion is that the recent trend in deficits extends beyond the next administration and that’s good news for Obama, who will be pushed out of the top-5.

What does it mean for equity markets, Deutsche Bank lays it out:

“You could argue that it’s taken progressively larger deficits over the last 90
years to keep strong stable equity returns and EPS growth, not to mention
maintaining economic growth”

I would certainly make that argument, particularly lately. And I think forward equity returns very much depend on where this is headed next.

Today’s market darling is Tesla, which had surprisingly large earnings $2.5 billion but $739 million of that was regulatory credits, also known as government subsidies. What does the stock price look like when you take away the source of 30% of its earnings?

That’s a direct example but so much of the velocity of money in the economy is held up by Americans and American companies receiving more from the government than they pay.

So what happens with the election? I think the most-hawkish scenario is one where Harris is President but Republicans win the House and Senate. That’s very unlikely but even holding the Senate might be enough to make some Republican fiscal hawks dig in.

Those would be the most-negative scenarios for equities. Another interesting one is if Trump wins the Presidency and Republicans win the Senate but Democrats control the House. That’s a realistic outcome and I wonder if it doesn’t result in Democrats suddenly putting on the fiscal hawk mask, particularly with the aforementioned Trump tax cuts expiring at the end of 2025.

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

The euro is at the highs of the day as it rebounds following three days of selling. The gains are mostly driven by the US dollar slide as it retraces following a long run. Treasury yields are down today with US 10s lower by 5 bps to 4.19%.

Zooming out further, the euro has dug itself into a big hole since late September and there are calls for new lows before year end.

To their credit, ECB policymakers this week are widely acknowledging that inflation will be lower than they thought. What needs to come with that is an acknowledgement that they’re behind the curve and need to cut rates by 50 basis points at successive meetings or risk dismal growth in 2025 (and beyond as fiscal excess is reigned in).

We’re in a regime right now — I believe — where early aggressive rate cuts will see currencies rewarded. That’s exactly what has happened with the US dollar in the past month. However as time goes on, that window of opportunity is closing, particularly for the ECB.

So I take this bounce in the euro as a standard overbought bounce. Nothing in the data suggests a pickup or one that’s coming. The best hope for EUR/USD bulls is the US dollar side of the equation. This pair bottomed yesterday after the Beige Book continued to highlight poor economic growth in the US, something that hasn’t appeared in the data yet.

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

I think people are taking some money off the table ahead of the election.

Stocks are falling despite lower Treasury yields.

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

Closing changes in Europe:

• Stoxx 600 flat
• German DAX +0.4%
• France CAC +0.1%
• UK FTSE 100 +0.2%
• Spain IBEX flat
• Italy’s FTSE MIB +0.2%

European stocks turned lower alongside the S&P 500, which opened strongly but is now up just 0.1%.

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

The Liberal Party behind Canadian Prime Minister Justin Trudeau tried to force him out this week, or at least 20 MPs did, but the move looks like a failure.

They held a meeting yesterday and told him to make up his mind by Monday. He reportedly told caucus he would take some time to reflect after hearing their concerns about his viability as leader.

Evidently he didn’t need much time as he just announced that he will lead the party into the next election.

That election could come very soon as the Bloc Quebecois gave him a deadline of Oct 29 to meet pension demands or they would withdraw support. There is still a decent chance the NDP will prop him but but he’s extremely unpopular and his Liberal Party would be routed in any election, barring a miracle.

This is how parliament would likely look based on the latest polls.

An influx of immigration has become a major issue in Canada and in response, Liberals yesterday leaked much lower immigration targets, which were confirmed today.

• reducing from 500,000 permanent residents to 395,000 in 2025
• reducing from 500,000 permanent residents to 380,000 in 2026
• setting a target of 365,000 permanent residents in 2027

he lower numbers already have telecom analysts warning that profits will be lower in the industry in the years ahead. Canada’s per capita GDP has been receding for many quarters and consumer spending per capita has retrenched in 7 of the past 8 quarters but the economy has continued to grow due to 3% population growth.

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