Strong US Data Keeps the Dollar on the Rise, ECB Cuts Rates, Market Focus Shift
Where We Stand
Yesterday’s market chatter reminded us one of my favourite adages: “Never bet against the US consumer.”
- Retail sales rose 0.4% month‑on‑month in September, a tidy bump above the 0.1% seen in August.
- The control‑group metric jumped 0.7% MoM—fastest increase since June—mirroring the basket used for GDP. (Nice, right?)
- Atlanta Fed’s Q3 GDPNow forecast nudged higher to 3.4% annualised; if the numbers hold, we’ll be observing the fastest growth pace since last year.
In short, the US economy seems to be doing its thing, and even if some FOMC members sigh over a last‑month 50bp cut, the early jobless‑claims drop (just 241k) and an unfavourable employment survey week put the spotlight on a solid growth story. Strong bank earnings came in early this week, reinforcing a bullish case for equities.
The Dollar’s Rally
Yesterday, the U.S. greenback danced through the Fed’s two consecutive 25bp rate cuts, breaking its 200‑day moving average for the first time in a few months. Meanwhile, a Treasury curve sell‑off saw steepening, also feeding the dollar’s gains. The market is now “buying growth” rather than chasing rate differentials—a trend that harks back to earlier in the year.
- The DXY topped highs seen since early August.
- G10 central banks, including the RBA and Norges Bank, have been tightening more in sync, easing fears that the FOMC’s 50bp cut derailed the global stance.
- ECB’s decisions: 25bp deposit rate cut yesterday (first back‑to‑back cut in a decade), another 25bp slated for December, with more cuts expected until rates hit a neutral 2% early next summer.
Despite rallying, the Euro faces headwinds from sluggish domestic growth, and the pound’s outlook is clouded by the upcoming budget. That’s why gold keeps being an attractive safe‑haven—Gold’s YTD gains have had everyone scratching their heads, but it looks set to push beyond $2,700/oz.
Look Ahead – A Quiet Day That Might Keep Sentiment Low
It’s a calm Friday after a busy week:
- UK retail sales: ‑0.4% MoM in September and ‑0.3% excluding fuel. Watch the “big ticket” spend; a hint of restraint could signal a tightening phase before the budget.
- US building permits & housing starts—less likely to wow investors.
- Fed speakers (Bostic, Kashkari, Waller) have already commented this week; today should be a re‑major.
- Geopolitical tension continues to simmer in the Middle East, so expect some profit‑taking and de‑risking at the end of the week.
With election day only about two weeks away, it wouldn’t be surprising if risk appetites shift. After all, the S&P has already jumped over 22% YTD.
Enjoy tomorrow’s market “peaceful” update. No surprises today—just data that keep the financial universe humming!
