# United States
Today’s financial markets reflect a modest bout of dollar liquidation. The US 10-year yield has decreased by about a dozen basis points from yesterday’s high, encouraging a decline in the greenback against most G10 currencies, except for the Canadian dollar and sterling. Among the key economic data releases, two US reports stand out: the ADP estimate of private sector employment and the Q3 GDP estimate. The ADP has been a reliable indicator of job growth this year, so its forecast of a 112k increase in jobs for October is eagerly anticipated. Meanwhile, the first estimate of Q3 GDP, expected to remain around 3.0%, mirrors Q2 figures, although factors like the widening goods trade deficit and private investment slow down could impact this.
US equities futures are proving resilient, despite mixed indexes in Asia Pacific and Europe. The benchmark 10-year yield shows variability, with US Treasury yields down roughly three basis points to approximately 4.22%. Gold continues its upward trajectory, extending gains to nearly $2790, while December WTI remains within yesterday’s trading range of $67.30-$68.20.
# Eurozone
In a surprising twist, the Eurozone’s Q3 economic growth surpassed expectations, expanding by 0.4%. Amongst the member states, Germany showed unexpected growth at 0.2%, outperforming forecasts despite a Q2 contraction revised to 0.3%. France matched the general Eurozone growth figure with a 0.4% rise, and Spain outperformed with a remarkable 0.8% growth. However, Italy’s economy experienced stagnation, missing projected growth of 0.2%. The narrowing US 2-year premium over Germany has bolstered the euro’s recovery, with the euro approaching a resistance level close to $1.0860 today. The CPI figures for Spain and German states suggest a marginal increase in inflation rates, signaling potential challenges ahead.
# United Kingdom
Sterling has maintained a stable position around $1.30, awaiting the forthcoming UK Autumn budget announcement. Predominantly focused on public investment, the budget is expected to introduce a mix of spending hikes and tax increases. The Chancellor of the Exchequer’s emphasis on covering day-to-day government spending through revenue, while funding investments through borrowing, introduces a nuanced fiscal outlook. Sterling seems poised for recovery following the budget unveiling, having reached a five-day high above $1.3010 recently.
# China
In China, the dollar reached its highest level since mid-August against the offshore yuan, peaking at CNH7.1640. However, the yuan has shown resilience following news that the nation is contemplating a substantial fiscal stimulus package worth around CNY10 trillion (~$1.4 trillion). As a result, the dollar’s gains were partially reversed. Meanwhile, the People’s Bank of China’s setting of the dollar’s reference rate at CNY 7.1390 reflects ongoing currency management strategies amidst national economic shifts and expectations around upcoming October PMI results.
# Japan
Commencing today, the Bank of Japan’s meeting aims to update forecasts and reiterate its future guidance. Though actual policy changes are unlikely, the market anticipates a 25 basis point rate increase by mid-next year. Following a dip inspired by fluctuations in US 10-year yields, the dollar is steady, continuing to trade within the JPY152.40-JPY153.90 range. The yen shows stability amid various international fiscal stimuli, with eyes on forthcoming retail sales and industrial production data.
# Canada
Following an outside up day in currency trading, the Canadian dollar managed to hold its ground despite momentum suggesting further potential for upward movement in the US dollar against it. Expectations for a rate cut in December, alongside Canada’s 2-year yield discount to the US at its widest since 1997, underscore a challenging fiscal landscape. Meanwhile, Canada anticipates its August GDP figures, with stagnation expected following 0.2% growth in July.
# Australia
Australia reported its Q3 CPI rise of 0.2%, marking the smallest quarterly increase since early 2020. The year-over-year pace has slowed to 2.8%, the first instance of less than 3% since early 2021. Despite declining rates, the futures market perceives minimal chances of an imminent RBA rate cut. Australia’s economic outlook remains cautious, awaiting signals from global markets and its own monetary authorities.
# Mexico
Mexico’s economy exhibited growth with Q3 GDP expected to expand by 0.7%. This pace represents the fastest growth since Q3 2023, although the year-over-year growth remains weak at 1.3%. Persistent challenges linger, as indicated by the US dollar’s robust performance against the peso. The peso continues trading near monthly highs, with sustained interest driving activity towards previous high points near MXN20.2180. Meanwhile, broader economic narratives around labor and social policies may further impact the fiscal landscape.
