* Fed seen on track for 25bps rate cuts in November and December

* Dollar little changed after mixed US economic reports

* Stocks edge up as key US earnings awaited, Treasury yields climb

* Google jumps over 5% after hours after beating across the board

FX: USD made a fresh cycle high on firmer yields at 104.63, last seen in late July, before paring gains and closing very marginally lower. There was mixed US data in the form of strong consumer confidence but softer JOLTS figures. Otherwise, it felt relatively quiet with eyes on Friday’s NFP and next week’s US election and FOMC meeting. Support is strong around 104.

EUR dipped to a low of 1.0768 before finding buyers after the US data and closing flat on the day. We had more comments from ECB officials who implied the bank is not keen to ease aggressively. There are still around 35bps of rate cuts priced into the December meeting.

GBP was the clear outperformer andlooks to have found support around its 100-day SMA at 1.2971. Bond markets are bracing for tomorrow’s budget. More spending and more debt issuance are predicted, which will be net expansionary. That comes after the Chancellor announced changes in the way the government measures indebtedness. Last week’s lows are at 1.2906/08.

USD/JPY printed an inside day and doji after its break higher on Monday. Treasury yields continue to break new ground higher. As we predicted last week, softness prompted a warning from a finance minister that the government is watching post-election FX developments closely.

AUD dropped again, the fourth day in five and through the next major downside level at 0.6574.That’sthe major Fib retracement level (38.2%) of the August to September move. Focus is on the CPI release today. USD/CAD moved north again to new highs at 1.3919. The August spike high is 1.3946.

US Stocks settled generally in the green. The S&P 500 closed 0.16% higher to settle at 5,832. The tech-laden Nasdaq 100 gained 0.98% to finish at 20,550. The Dow settled down 0.36% at 42,233. Stocks were led higher by notable tech and communication services outperformance, with all other sectors lower. Google’ parent Alphabet’s spending boosted the cloud business and ad sales and saw the stock up over 55 after the closing bell. Meta and Microsoft both report after the US close today. The Facebook and Instagram owner will be wary of slowing ad spend hitting revenues and profitability. Meta’s ability to show that its AI investment is effectively translating into ad revenue growth will be crucial, with the stock trading near all-time highs. For Microsoft, growth in Azure will go up against its AI-driven capex and prospects. The ability to maintain or grow margins amid heavy investment in AI infrastructure is likely to be key.  

Asian stocks: Futures are mostly positive. Asian stocks were mixed even after a mostly positive Wall Street handover. The ASX 200 got boosted by gold stocks with M&A activity also helping sentiment. The Nikkei 225 moved higher on yen weakness and lower unemployment. The Hang Seng and Shanghai Composite were mixed with the former supported by tech. But the mainland was mixed on US trade frictions.

Gold made fresh record highs, breaking to the upside after a period of bullish consolidation. The precious metal trades up on the week despite deflating risk premiums, confirming the focus remains the US election and especially the prospect of a Trump 2.0. It may bring greater policy disruption, trade tariffs, and increased geopolitical risks, plus questions about debt sustainability.

Day Ahead – Australia CPI and US GDP

Australia releases Q3 CPI with inflation finally starting to move in the right direction over the summer. The monthly print fell to 2.6% y/y in August, hitting the RBA’s 2-3% target band for the first time since 2021. It is expected to slow sharply to 2.9% in the year, so just within the target range. But markets are reluctant to price in any real risk of rates easing before the second quarter of next year. Similarly, the RBA at next week’s meeting, is likely to remain cautious for now and at best, begin the debate of when to start cutting rates.

US GDP, powered by resilient consumer spending and business investment. should print a second consecutive 3% number. Economists says that high-income households are going from strength to strength, but lower-income households are feeling more pain as inflation’s legacy hurts spending power much more. We note that the Atlanta Fed’s GDPNow model puts growth above this consensus estimate at 3.4%.

Chart of the Day – Aussie sinking

Even if there is more good progress in bringing inflation down, particularly in the trimmed and weighted mean measures, the RBA is likely to remain cautious for now. However, a relatively hawkish RBA is not helping the aussie at the moment versus the dollar. That is because the seemingly rising odds of a Trump 2.0 win means high, new tariffs, especially to China and that is is hurting AUD.

Aftert topping out and finding resistance above the June and July highs from last year around 0.6899, the major has fallen sharply as the Trump trade has kicked in. Rate cut expectations from the Fed have also been reined in and boosted the dollar. Yesterday, prices fell through the Fib retracement level (61.8%) of the August to September move at 0.6574. The next retracement level is at 0.6475. The midpoint of that move is above at 0.6644.