Market News

Reuters ECB sources:

• Policymakers see a hike in December followed by a pause
• New staff estimates show higher bond yields cutting growth by cumulative 100 bps, inflation by 90 bps in 2027-28 versus baseline

That's a rough bite out of growth, especially if Lagarde is right and a portion of it is driven by hyperscaler borrowing to spend in the US and Asia.

The market pricing for a December hike is largely there already but I'm interested in the pause. They may be thinking that one more hike is enough, but I imagine that depends on what happens in the Iran and Ukraine wars.

We are seeing some modest selling in the euro on this, with the dovish 'pause' beyond Dec driving it.

Fundamentally, and the recent him broader view, gold’s retreat from its August high reflects a market more concerned about higher interest rates than attracted to its protection against inflation and geopolitical uncertainty. Higher Treasury yields, a firm dollar and expectations of further Federal Reserve tightening have made it difficult for buyers to sustain a recovery.

That highlights an important distinction for gold traders. Although gold is often viewed as an inflation hedge, higher inflation does not automatically translate into higher gold prices. If inflation leads investors to expect tighter monetary policy and higher yields, the interest-rate response can outweigh demand for inflation protection. Gold pays no interest, so…

Technology stocks are getting hit hard following Alphabet’s earnings after the close yesterday. Markets are also digesting the FOMC rate decision, higher inflation, stronger-than-expected GDP, steady jobs and oil prices that are lower today but still near the $100 level.

There are a lot of balls in the air, and stocks—especially the technology and AI names—are not taking it well. Both the Nasdaq Composite and Nasdaq 100 are down around 1.5%, while the S&P 500 is holding up better with a decline of around 0.50%.

The technical picture reflects that divergence. The S&P remains above its key daily support, while both Nasdaq indices have fallen below their 100-day moving averages. Those breaks give sellers more control until buyers can reclaim…

One of the most confusing aspects of financial markets for new traders is that prices often move in the opposite direction to what the news suggest. Stocks can fall after strong economic data, gold can fall despite geopolitical tensions, and bonds can rise following an inflation surprise. The most important thing to know is that markets react to how new information changes expectations, not whether the news is good or bad.

Financial markets are forward-looking. Prices reflect what traders collectively expect to happen over the coming months, meaning much of the anticipated impact of an economic release or policy decision may be already priced in. 

What matters the most is how the actual outcome compares to what the market expected. For…

The big news earlier today was ECB President Christine Lagarde announcing that she will depart in February.

Bank in April on Bloomberg TV she said: "When there is big clouds on the horizon, the captain does not leave the ship— and this captain is not going to leave the ship, because I see clouds."

So I guess she doesn't see clouds any longer.

In any case, here are the headlines:

• Main refi rate 2.65% vs 2.65% expected
• Deposit rate 2.50% vs 2.50% expected
• Marginal lending facility at 2.90% vs 2.90% expected
• Says energy prices continuing to rise, posing upside risks to inflation outlook and downside risks to growth
• Underlying inflation has remainded broadly stable so far and wages do not show a material response at this stage
• Well positioned to…

Buyers lean against familiar support

The USDCAD fell to a low of 1.39676 last Friday, stalling just above a swing area between 1.3948 and 1.3963 that stretches back to late March 2025. Buyers leaned against that area last week, and they have done the same thing today.

Today’s low reached 1.3971, just above Friday’s low and the underlying swing area. The repeated defense gives buyers a level to lean against and define their risk. However, holding support is only part of the battle. They also need to push through resistance.

The 1.4000 level caps the recovery

On the topside, sellers have been leaning near the natural resistance level at 1.4000. That leaves the pair confined to a narrow trading range today, with room to roam if buyers or sellers…

• AI investment and government spending should support growth
• Renewed energy prices increases and financing costs hurt confidence and growth
• Early stages of pricing chain point to upward pressure
• Wages pressures remain moderate

the euro dipped as low as 1.1106 to 1.1130.

• Energy prices have increased beyond the baseline path
• Energy will boost inflation further in the medium term
• Headline inflation likely well above target in coming quarters
• Risks to growth are to the downside

Headlines:

• US futures tumble as Alphabet earnings revive AI spending fears, Amazon is next in the firing line
• ECB president Lagarde set to step down from her position next February
• Crude oil remains capped by renewed US-Iran deal hopes, but upside risks persist
• Trump administration in ongoing talks for a temporary peace deal with Iran - Semafor
• Gold whipsaws on FOMC decision as near-term outlook turns more bullish amid a slow-moving Fed
• Economic data spotlight: Fed rate hike bets survived Warsh, but can they survive US PCE inflation?
• Google stock analysis after earnings: Is AI eating into search profits?

Markets:

• CAD leads, AUD lags on the day
• Gold down 1.1% to $4,018
• 10-year Treasury yields down 2 bps to 5.02%
• WTI crude oil down 0.8% to…

The day after the Fed, markets have another set of questions to answer.

Did Chair Warsh give the economy more room to grow, or simply give the Fed more time before another rate hike? Are massive AI investments generating sufficient returns? And will today’s growth and inflation reports support the market’s expectations for additional tightening?

The early price action is mixed. Treasury yields are lower across the curve, the dollar is modestly higher against some currencies and lower against others, and U.S. equity futures are under pressure. The Nasdaq is leading the decline as a sharp premarket fall in Alphabet overshadows stronger results from Microsoft.

Warsh’s message: Healthy growth, elevated inflation and time to assess

The Fed held…

• Prior MoM +0.2%
• Core PCE +0.3% y/y vs +3.1% expected
• Prior was 3.0% y/y
• Headline PCE +3.6% y/y vs +3.6% expected (prior 3.4%)
• Deflator MoM +0.5% vs +0.5% expected (prior +0.3%)

Consumer spending and income for September:

• Personal income +0.2% vs +0.3% expected. Prior month +0.2%
• Personal spending +0.5% vs +0.6% expected. Prior month +0.9%
• Real personal spending 0.0% vs +0.5% prior

The US dollar is near the highs of the day against the yen and Australian dollar but the price acton on this report, claims and GDP has been minimal. The focus is on AI after Google's earnings miss and big slump. As for this report, it's a reminder that headline inflation is a long ways from 2% but we will have to wait another month to see if it's…

• Prior 194K (revised to 195K)
• Continuing claims 1701K vs 1720K expected
• Prior 1728K (revised to 1722K)

US initial jobless claims came in at 194K versus 199K expected, while continuing claims fell to 1.701 million against expectations of 1.720 million. The previous readings were revised to 195K and 1.722 million, respectively.

US Jobless Claims measure the number of people filing for unemployment benefits and provide a timely indicator of labour market conditions. Initial claims track new applications and offer insight into layoffs, while continuing claims measure the number of people still receiving benefits, providing clues about how easily unemployed workers find new jobs.

The report points to continued labour market resilience, with both…

• Prior quarter 2,2%

The details 

• GDP: 3.4% vs 3.2% expected. Prior revised to 2.2% from 1.5%.

• Real final sales: 1.7% vs 2.0% expected. Prior 2.8%

• Consumer spending: 3.8%. Prior 3.8%.

• GDP deflator: 2.2% vs 3.5% expected. Prior 6.1%

• Core PCE prices: 2.5% vs 2.4% expected. Prior 3.3%

• PCE prices: 2.1% vs 2.6% expected. Prior 5.0%

What drove the GDP increase?

The 3.4% increase in Q3 GDP was supported by investment, consumer spending and government spending. Trade was the main drag, with exports falling and imports rising.

• Investment was the largest positive contributor, adding 3.27% to growth. That category includes business investment, housing and changes in inventories.

• Consumer spending added roughly 2.52%, reinforcing the importance of household…