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New Zealand data much improved. Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER). Link to more here. In summary:

Business confidence comes in at -1% in Q3

• prior -44%

Net 5% expect a deterioration in general economic conditions over the coming months

• prior was 40% expecting deterioration

Firms’ own trading activity, net 31% reporting a decline in activity in their own business in Q3, but only net 2% are expecting weaker activity in Q4.

On inflation pressure:

• slight increase in the proportion of firms reporting higher costs in Q3
• only a net 3% of firms were able to raise prices to pass on costs (from 23% in Q2)
• “The change in firms’ price-setting behaviour was highlighted by the RBNZ as a key factor providing them the comfort that inflation was easing enough to warrant them in commencing an easing cycle in the OCR.

On the employment front:

• easing in capacity pressures
• significant proportions of firms now reporting it easy to find skilled and unskilled labour
• Many firms also reduced their staff numbers in the September quarter
• results point to increased slack in the labour market

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The QSBO is a closely-watched survey:

• is one of the country’s longest-running business surveys. It provides a insights into the business climate and economic conditions in New Zealand, and the factors influencing business sentiment, such as domestic and international economic conditions, government policies, and other external events.

• surveys businesses across various sectors
• gathers data on business confidence, demand, hiring intentions, investment plans, and other economic indicators
• QSBO findings can vary significantly from one quarter to another

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

Markets in mainland China are closed today, Tuesday, October 1, 2024. They reopen for trade on Tuesday 8 October.

Hong Kong markets are also closed on Tuesday, October 1, 2024 for the National Day holiday. They reopen on Wednesday, October 2, 2024.

‘Stock Connect’, both directions, will be closed as per the mainland China holidays (i.e. until reopening Teusday October 8).

***

Shanghai-Hong Kong Stock Connect is one:

• a mutual market access program through which investors in each market can trade shares on the other market directly
• launched in 2014
• Northbound Trading allows international and Hong Kong investors to trade eligible shares listed on the Shanghai Stock Exchange via the Hong Kong Stock Exchange.
• Southbound Trading allows mainland Chinese investors to trade eligible shares listed on the Hong Kong Stock Exchange via the Shanghai Stock Exchange.
• The Shanghai-Hong Kong Stock Connect allows foreign investors to access China’s A-shares market (shares in mainland China-based companies that were previously difficult for foreign investors to access) and it allows mainland Chinese investors to access the Hong Kong market.

In addition to the Shanghai-Hong Kong Stock Connect, there is also the Shenzhen-Hong Kong Stock Connect

• launched in 2016
• links Shenzhen Stock Exchange with the Hong Kong Stock Exchange in a similar way

***

South Korea markets are also closed today for Armed Forces Day.

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

• US equity close: A surge in buying late
• Markets stop panicking when central bank start panicking
• How major market indexes performed in the third quarter
• WTI crude oil futures settled $68.17
• USD moving higher as Powell taps the brakes on cuts
• Powell Q&A: A downside risk in GDP was a revision to GDI, but GDI was revised higher
• Powell: Policy will move over time to neutral if economy meets forecasts
• Goldman Sachs highlights the case for an undershoot in US inflation
• Fed Goolsbee worried about the possible continued port shutdown. Case for rate cuts clear.
• Fed Pres. Bostic: Is open to another 50 bp cut if labor market shows continued weakness
• Israel defense minister: The next phase of the war will begin soon
• US believes Israel could imminently launch a more limited ground incursion in Lebanon
• China delivers on pledge to lower downpayments for homes
• Dallas Fed September manufacturing index -9.0 vs -9.7 prior
• ECB’s Lagarde: Next inflation reading likely to be below baseline
• Kickstart the FX trading day for Sept 30 w/a technical look at EURUSD, USDJPY and GBPUSD
• ECB’s Lagarde: Some survey indicators suggests the recovery is facing headwinds
• ForexLive European FX news wrap: Euro nudges up with month-end in focus
• Germany September preliminary CPI +1.6% vs +1.7% y/y expected

The new week was void of economic data with the exception of the Dallas Fed Manufacturing index which came in at -9.0 vs -.9.7 last month. However, there was some Fedspeak with Atlanta Fed Pres Bostic and Chicago Fed Pres. Goolsbee kicking things off.

Bostic expressed openness to a 50 basis point rate cut if the labor market continues to show signs of weakness. His baseline expectation, however, is for an orderly easing process as inflation slows and the job market holds steady. Despite this, Bostic remains cautious due to core inflation, as measured by the personal consumption expenditures (PCE) price index, still being at 2.7%.

Bostic emphasized the importance of closely monitoring job growth. He noted that if employment growth slows below 100,000 jobs, it would raise concerns about potential underlying issues in the labor market. Despite this, his business contacts report that they do not expect layoffs, and recent PCE data shows that disinflation remains on track.

Looking ahead, Bostic’s outlook involves gradual Fed easing over a 15-month period, with a target policy rate of 3.00%-3.25% by the end of 2025. The Fed’s dot plot looks for EOY 2025 at 3.40%. He currently supports one additional 25 basis point rate cut this year, contingent on upcoming inflation and labor market data. The Fed penciled in 50 bps additional easing by year end.

Soon after Bostic spoke, Chicago Fed President Austan Goolsbee, speaking on FOXBusiness, expressed concern about the potential continuation of a port shutdown. He noted that the Fed’s rate cuts are a response to the normalization of the economy, emphasizing that the labor market remains sustainable despite some cautionary indicators. Goolsbee highlighted that the process of easing interest rates is essential, predicting a significant number of rate cuts ahead. He also stated that inflation is approaching the Fed’s target and stressed that the case for cutting rates is clear and unrelated to political considerations.

After they had spoken, it was the Fed Chair Powells turn. He spoke and answered questions at a National Association of Business Economists meeting (NABE).

Powell indicated that monetary policy will gradually move toward a neutral stance if the economy continues to meet projections. He highlighted that the risks are balanced and that decisions will be made on a meeting-by-meeting basis.

Importantly, Powell noted that further cooling of the labor market is not necessary to achieve the Fed’s targets, as both the economy and labor market remain in solid shape. He expressed increased confidence that inflation is on a sustainable path toward 2%, with broad-based disinflation, and expects housing services inflation to continue declining as long as rent growth for new tenants remains low.

The recent 50 basis point rate cut, according to Powell, reflects confidence in maintaining labor market strength while recalibrating policy. He emphasized that the process of rate cuts will be gradual, guided by economic data, with the possibility of two more cuts by the end of the year.

Powell also pointed to an upward revision in Gross Domestic Income (GDI), which showed stronger growth than initially reported, with GDI growing at a 3.4% rate in the recent quarter. This revision suggests consumers may have more spending power, which could help sustain the economy’s strength.

The comments from Powell gave the USD a bid and sent yields higher as the market continued to backtrack on a 50 bp cut in November. The expectation for 50 bps is down to 35% from near 60% last week.

Looking at the yield curve:

• 2-year yield 3.643%, plus 8.0 basis points.
• 5 year yield 3.560%, +5.7 basis points
• 10 year yield 3.784%, +3.6 basis points
• 30 year yield 4.122%, +2.5 basis points.

US stocks did move lower as Powell spoke, but by the close, the major indices held pushed into positive territory to end the trading month.

• Dow Industrial average rose 17.15 points or 0.04% at 42330.15. At session lows, the index was down -383.93 points
• S&P index rose 24.31 points or 0.42% at 5762.48. At session lows, the index was down -34.64 points
• Nasdaq index rose 69.58 points or 0.38% at 18189.17. At session lows, the index was down at -122.03 points

The Small-cap Russell 2000 close up 5.26 points or 0.24% of 2229.97.

Mapping the strongest to the weakest of the major currencies, the NZD and the AUD is the strongest of the major currencies, while the JPY was the weakest of the major currencies.

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

Bank of America say that with EUR/USD on approach to their year-end target of 1.12 the pair has limited upside:

• market expectations for Federal Reserve and European Central Bank interest-rate cuts are fully priced now for 2024

(

I’ll just pop in that after Powell spoke on Monday those expectations looked to have been overpriced for the Fed:

• US dollar rises, stocks fall as Powell higher GDI and base case to cut 25 bps
• USD moving higher as Powell taps the brakes on cuts

)

BoA go on:

• EUR/USD should rise again in 2025, weaker dollar impacting
• “Our thesis remains that Fed policy easing in a US soft landing will weaken the dollar from an overvalued level.”
• target 1.15 by Q2 next year
• holds a long now with stop loss at 1.10 (raised from 1.04 previously)
• end-2024 target is 1.12

—

EUR/USD update:

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

The US market didn’t like what it heard from Powell but that was overwhelmed by late-quarter buying.

• S&P 500 +0.4%
• Nasdaq Comp +0.4%
• DJIA flat
• Russell 2000 +0.2%
• Toronto TSX Comp +0.2%

See quarterly performance here.

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

First off, there are market closures in Asia today for holidays.

• Mainland China is closed
• Hong Kong is closed
• South Korea is closed

Bank of England Monetary Policy Committee member Greene is up soon. Greene spoke last week:

• BOE’s Greene: Appropriate to take a gradual approach to removing policy restrictiveness

The data agenda that follows is packed.

New Zealand kicks it off with building permits and the Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER). The QSBO is a closely-watched survey:

• is one of the country’s longest-running business surveys. It provides a insights into the business climate and economic conditions in New Zealand, and the factors influencing business sentiment, such as domestic and international economic conditions, government policies, and other external events.

• surveys businesses across various sectors
• gathers data on business confidence, demand, hiring intentions, investment plans, and other economic indicators
• QSBO findings can vary significantly from one quarter to another

NZD/USD may find some support if this survey improves but overall is more subject to global US dollar moves at present.

• 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:.

Thread to post financial markets trading ideas – Post ’em if ya got ’em!

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

The US dollar is at the highs of the day across the board after a pair of important comments from Powell.

1) In the first, he said that GDI revisions last week removed a downside risk for GDP. The fear was that GDP would be revised down to GDI, instead it was GDI revised up to GDP. Powell noted that means more money in consumer pockets and stronger spending.

2) He said the baseline forecast was for 25 bps cuts at each of the final two meetings of the year.

Combined, the comments took down the odds of 50 bps from 43% to 36%. More importantly, the US dollar is at the highs of the day and stock markets are under pressure.

AUD/USD:

The S&P 500 has dropped about 30 points since he started speaking. US 2-year yields are up 9 bps.

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

The title of the speech is “Finding Harmony in the Noise: Transitioning to a New Normal”. These are his first comments since the Sept 18 FOMC press conference.

The title suggests he’s going to wade into the outlook. The market is pricing a 57% chance of a 25 bps cut in October and 43% of 50 bps.

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

Goldman Sachs is out with a note today highlighting downside inflation pressures from oil. I’ve been writing about this for awhile, noting that oil is trading more than $20 below where it was at this time last year, adding a powerful drag for crude.

Looking out further, Goldman Sachs sees continued low prints and heading below 2%.

Using the oil futures curve, “we would .. expect headline CPI inflation of 1.8% year-over-year next April, roughly in line with what’s currently priced into inflation swaps,” they write.

There is some counter-seasonality late this year to run against crude but in early 2025, it all begins to align and that should keep the Fed dovish.

That said, any forecast based on the price of oil at a time when 1) The Middle East is instable and, 2) China is stimulating, is a highly-variable forecast.

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