COT FOREX

U.S. manufacturing showed resilience in September as new orders for core capital goods climbed more than anticipated, fueling optimism for business investment amidst a challenging economic landscape. The Commerce Department reported a 0.5% increase in non-defense capital goods orders, excluding aircraft, outperforming expectations and marking a second consecutive monthly rise. With the Federal Reserve maintaining a dovish stance, cutting rates in recent months and projecting further reductions, the outlook for capital expenditures and business growth remains upbeat, bolstered by the likely easing of election uncertainties following the November 5th presidential vote. Economists are cautiously optimistic about business spending, noting that easing interest rates could support a stable economic backdrop for growth in investment and demand. “The direction of rates is now clearly lower,” noted Shannon Grein of Wells Fargo, “and post-election, businesses may face a clearer environment conducive to increased capital expenditure.” Though overall durable goods orders fell by 0.8% amid declines in transportation equipment, the resilience of core orders signals a steady demand for essential manufactured goods. The drop in orders for transportation equipment, particularly in the aircraft sector, reflects broader challenges facing manufacturers like Boeing amid strikes and operational disruptions. Still, positive trends in primary metals and fabricated metal products underscore strength in essential sectors, signaling that, while growth may moderate, the economy is well-positioned to avoid deeper downturns as the Fed continues its supportive policy stance. #USManufacturing #BusinessInvestment #CapitalGoods #EconomicGrowth #FederalReserve #InterestRates #DurableGoods #USEconomy #Election2024 #EconomicForecast https://lnkd.in/ddy7v-XE

The Bank of Canada delivered a bold rate cut on Wednesday, slashing its key rate by 50 basis points to 3.75%, marking its first large move in over four years and signaling a turning point toward an era of low inflation. With inflation dipping to 1.6% in September—well below the 2% target—Governor Tiff Macklem expressed relief at the bank’s success in reining in soaring prices. “It’s a good news story,” he said, affirming that Canada is emerging from a prolonged battle against inflation. Despite this rate reduction, economic demand remains sluggish, with muted consumer sentiment and slow business sales dampening growth. Macklem pointed out that the latest cut is expected to encourage spending, hoping to foster economic momentum. The central bank also hinted at another possible significant rate cut in December, driven by the need to balance stable inflation without stifling growth. As the bank keeps a close watch on demand indicators, market sentiment suggests cautious optimism, with money markets fully pricing in a 25-basis-point reduction in December, and analysts seeing an increasing likelihood of another larger cut. With Canada’s economy showing only modest growth amid high borrowing costs, the Bank has recalibrated its growth forecast, estimating annualized Q3 growth at 1.5%, down from 2.8%. Meanwhile, inflation expectations are set at 2.5% for this year, tapering to 2.0% by 2026, as the central bank focuses on a stable, low-inflation environment to support the broader economy. #BankofCanada #RateCut #Inflation #EconomicGrowth #InterestRates #CanadaEconomy #TiffMacklem #MonetaryPolicy #CanadianDollar #CPI https://lnkd.in/dbjEr_S9

Germany's economy may be on slightly firmer ground than anticipated as October business activity showed a milder contraction than in recent months, according to the HCOB German flash composite PMI. Rising to 48.4 from September's 47.5, the index still indicates contraction but beats analyst forecasts, suggesting that a return to growth could be within reach. The surprise resilience was particularly evident in the services sector, which unexpectedly expanded with a reading of 51.4, while manufacturing also showed improvement, climbing to 42.6 from 40.6. However, high energy costs, fierce competition from China, and labor shortages continue to weigh on Germany’s manufacturing sector, reflecting the challenging landscape for Europe’s largest economy. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted the better-than-expected start to Q4 but warned that GDP growth for the year may still stagnate. German government forecasts project a 0.2% contraction for 2024, with upcoming third-quarter GDP data set to shed more light on Germany's economic trajectory. #GermanyEconomy #PMI #GermanIndustry #EconomicGrowth #Manufacturing #ServicesSector #EnergyCosts #ChinaCompetition #LaborMarket #GermanGDP https://lnkd.in/dsFe56MN

European Central Bank policymakers are shifting their attention to a new concern: inflation could soon fall below the ECB’s 2% target, following years of rapid price growth. With eurozone inflation dipping to 1.7% in September, key central bank figures from France, Portugal, and Finland are sounding the alarm about potential undershooting if economic growth remains weak and interest rates stay relatively high. These warnings have fueled market expectations for quick, successive rate cuts, with investors betting on reductions at each ECB meeting into spring. French central bank chief François Villeroy de Galhau highlighted the need for “agile pragmatism” from the ECB to avoid falling behind with rate cuts. Portugal’s Mario Centeno, known for his cautious stance on high rates, echoed this view, emphasizing the downside risks to inflation. Meanwhile, Olli Rehn, Finland’s central bank head, pointed to the eurozone’s prolonged economic stagnation and weakening growth outlook, which may intensify disinflationary pressures across the bloc. While ECB President Christine Lagarde took a more cautious tone, stating she anticipates inflation to meet the 2% target by 2025, she also expressed hope for a faster return to stability. This divergence in views highlights the ECB’s delicate balancing act as it navigates a fragile economy while aiming to stabilize prices. #ECB #Eurozone #InflationTarget #MonetaryPolicy #InterestRates #EuropeanEconomy #FrancoisVilleroy #ChristineLagarde #EconomicOutlook https://lnkd.in/dxmk8mC9

U.S. single-family homebuilding surged to a five-month high in September, reflecting a slight rebound in the housing market as lower gasoline prices left consumers with more disposable income. Despite this, future construction permits saw only a marginal rise, suggesting the sector remains cautious amid a surplus of new homes and prospective buyers holding off for lower mortgage rates. The data reveals a housing market grappling with mixed signals: while new builds are rising, overall activity continues to face headwinds from elevated mortgage rates and economic uncertainties. Single-family housing starts increased 2.7% to a seasonally adjusted annual rate of 1.027 million units in September, following a strong upward revision for August. However, building permits, a key indicator of future activity, edged up by just 0.3%, signaling continued hesitancy among builders. The drag from housing could extend into the fourth quarter, with economists predicting that residential investment will remain a weight on overall economic growth despite solid performances in other sectors. Economists note that while mortgage rates initially dropped following the Federal Reserve's recent rate cuts, they have since risen again, tempering optimism in the housing market. Many potential homebuyers are waiting for further rate reductions before entering the market, contributing to slower demand for new homes. The broader housing market remains under pressure, with permits for multi-family projects plunging by 10.8% in September. Although recent hurricanes may cause a temporary dip in construction activity, reconstruction efforts in storm-hit regions could provide a boost in the coming months. Overall, while the housing sector shows signs of stabilization, challenges persist as homebuilders and buyers remain cautious amid fluctuating interest rates and economic uncertainty. #HousingMarket #USRealEstate #SingleFamilyHomes #ConstructionPermits #EconomicGrowth #Homebuilding #MortgageRates #HousingStarts #EconomicOutlook #ResidentialInvestment https://lnkd.in/dbnkh9D7

British retail sales unexpectedly rose in September, defying predictions of a slowdown and suggesting that consumer spending remains resilient despite looming concerns about potential tax hikes ahead of the new government's first budget. Official data released on Friday showed that sales volumes increased by 0.3% last month, beating economists' forecasts of a 0.3% decline. With strong gains in July and August, sales saw a 1.9% rise in the third quarter—the largest increase since mid-2021. The surge was driven primarily by a 35% jump in non-food sales, notably in telecoms and computers, following the launch of Apple’s AI-focused iPhone 16 lineup. This uptick in consumer activity occurred despite ongoing concerns about higher taxes and a tough economic outlook, indicating that households are still spending, particularly on technology, even as consumer confidence hit a six-month low. The surprising strength in retail sales contrasts with reports of caution from major supermarket chains like Sainsbury's, which noted that shoppers are holding back on big-ticket purchases ahead of Finance Minister Rachel Reeves' first budget at the end of October. While inflation has eased from its peak of 11.1% to below 2%, and wages have grown faster than prices for several months, the broader outlook remains fragile with energy prices and cost-of-living pressures still weighing on households. #UKRetailSales #ConsumerSpending #EconomicOutlook #RetailSector #Inflation #Budget2024 #BritishEconomy #AppleLaunch #WagesVsInflation #TaxHikeConcerns https://lnkd.in/dt7RaX9N

China’s economy grew at its slowest pace since early 2023 in the third quarter, with growth hampered by weak domestic demand and a tumbling property market, despite slightly better-than-expected factory output and consumption in September. Official data released on Friday showed the world's second-largest economy expanded by 4.6% in Q3, a touch above the 4.5% forecast but still below the 4.7% growth seen in Q2, reinforcing concerns that structural issues remain unresolved. Authorities have ramped up stimulus measures since late September to boost the struggling economy, but markets are waiting for more clarity on the size and scope of the support package. While industrial output and retail sales outperformed expectations last month, the ailing property sector, which once contributed up to a quarter of China’s GDP, remains a significant drag on growth. New home prices fell at the fastest pace since 2015, underscoring the need for more decisive intervention from Beijing. Policymakers are expressing confidence in achieving the government's 5% annual growth target, citing further fiscal and monetary support. However, economists remain skeptical that the measures will be sufficient to tackle deeper structural challenges, including overcapacity, high debt, and an aging population. Experts warn that without a clearer roadmap, China’s long-term economic outlook remains uncertain. #ChinaEconomy #GDPGrowth #StimulusMeasures #PropertyMarketCrisis #EconomicOutlook #Manufacturing #RetailSales #PolicySupport #GlobalEconomy #Deflation https://lnkd.in/dMYzCi89

Japan's core inflation slowed in September, primarily due to government energy subsidies, but underlying price pressures remained steady, signaling that the Bank of Japan (BOJ) is likely to stay on course for further interest rate hikes. The core consumer price index (CPI), which includes oil but excludes fresh food, rose 2.4% year-on-year in September, a slowdown from 2.8% in August, largely due to subsidies curbing utility costs. However, an index excluding both food and energy, seen as a better indicator of demand-driven inflation, held firm at 2.1%, reflecting persistent price pressures despite softer fuel costs. Economists are eyeing Tokyo's October inflation data as a key indicator for broader nationwide trends, with many expecting it to fall below the BOJ's 2% target. While inflation remains above target, concerns linger over tepid services inflation, casting doubts on whether wage growth will be strong enough to sustain consumer spending and keep inflation around the BOJ’s 2% goal. The BOJ is expected to scrutinize the latest inflation data at its upcoming policy meeting at the end of October, with markets divided on whether the central bank will hike rates again in December or wait until early next year. The BOJ has already raised short-term rates to 0.25%, marking an end to negative rates, but Governor Kazuo Ueda has indicated that further rate hikes will depend on sustained inflation driven by domestic demand and wage growth rather than external factors like raw material costs. #JapanEconomy #Inflation #BankOfJapan #CPI #InterestRates #WageGrowth #EconomicPolicy #GlobalEconomy #EnergySubsidies #TokyoCPI #MonetaryPolicy #CentralBank https://lnkd.in/d-NznV3S

U.S. retail sales posted a solid increase in September, bolstered by lower gasoline prices, which gave consumers extra cash to spend at restaurants, bars, and clothing stores. According to the Commerce Department, retail sales rose by 0.4% last month, exceeding expectations and signaling continued strong economic growth in the third quarter. Consumers flocked to online stores, health retailers, and miscellaneous outlets, supporting overall spending. This resilience in consumer activity, backed by strong income growth, savings, and stable household balance sheets, further cements expectations for a Federal Reserve rate cut next month, likely a smaller 25-basis-point reduction. With inflation easing and labor market momentum steady, U.S. economic growth remains robust. The Atlanta Fed has upgraded its third-quarter GDP growth estimate to 3.4%, reflecting the economy’s sustained momentum. However, the September rise in retail sales suggests that household spending will keep the economy on a steady track as the year progresses, despite uncertainties such as the upcoming U.S. election. As consumers continue to spend on dining, clothing, and personal care, the question remains: how much will this influence the Fed's next move on interest rates? Despite strong jobless claims and employment growth, some sectors, such as electronics and appliances, saw declines, showing that consumer sentiment is becoming more selective. The strong retail performance and overall economic resilience will keep markets on edge as investors anticipate how this will affect the Fed’s path on monetary policy. #USRetailSales #EconomicGrowth #FederalReserve #ConsumerSpending #InterestRates #RetailEconomy #USJobs #EconomicOutlook #GDP #FederalReserve https://lnkd.in/dJWzG9s8

Christine Lagarde and financial markets seem to be speaking different languages. Despite the European Central Bank’s (ECB) third interest rate cut this year, which lowered the benchmark rate to 3.25%, investors are skeptical. Lagarde remains optimistic about achieving a "soft landing"—quelling inflation without triggering a recession—but traders see storm clouds ahead, betting on a sharp rate plunge over the next year. With inflation down from its peak of 10.6% in October 2022 to just 1.7% in September, below the ECB's 2% target, Lagarde’s position could be seen as reassuring. However, markets are focusing on declining business activity and weakening corporate loan demand, expecting the euro zone to slip into recession by 2024. According to derivatives prices, traders are predicting the deposit rate could drop to below 2% by next October, significantly below neutral monetary policy levels. The disconnect between Lagarde’s vision of steady economic growth—forecasting a GDP increase of 0.8% this year and 1.3% in 2025—and market expectations of an economic downturn puts the ECB president in a challenging position. She must convince inflation hawks within the ECB to speed up rate cuts, clearly signal to investors her commitment to easing monetary policy, and hope that these measures can sustain growth across the euro zone. The path to getting Lagarde and the markets aligned looks long and uncertain. #ECB #ChristineLagarde #Eurozone #InterestRates #Inflation #MonetaryPolicy #Recession #EconomicGrowth #SoftLanding #FinancialMarkets https://lnkd.in/dPQxNmmF