Risk remains on the back-foot this morning after yesterday’s sell-off in US equities, safe-haven flows into the USD, and increase in Treasury yields. However, a slew of US economic data this morning has reversed many of those moves. US 3rd quarter GDP comes in highest since 2021 at 4.9% versus an expectation of 4.0% while the Core PCE Price Index fell 0.1% short of expectations at 2.4%, essentially implying strong economic growth with falling inflation. 

The European Central Bank also paused their rate-hiking cycle after 10 consecutive increases and EUR/USD is slightly lower on the day. This was widely expected as President Lagarde has signaled that inflation has been coming down and that there needs to be some time to process the lag effects of 450 basis points of consecutive hikes. The overall tone of the speech and press conference leaned dovish as Lagarde stressed slower growth and tougher lending conditions. She was light on policy outlook in the future saying, “now is not the time for forward guidance.”

On the earnings front, Meta (Facebook’s parent) released positive results but warned about future ad revenue due to economic contraction, which sent risk lower overnight. UPS also cut its annual profit forecast adding to general economic growth concerns. The next big release is that of Amazon today after the market close. 

Finally, the US Treasury is to auction about $200 billion of bills & notes over the course of the day with market participants sure to keep an eye out on demand given issuance volumes coming under the microscope lately. Treasury president Yellen will be speaking at 1:30 and may address this subject.

EUR/USD see above.

USD/CAD is slightly higher on the day, continuing yesterday’s move after the Bank of Canada rate decision where they kept rates unchanged for the second consecutive meeting. Governor Maklem was on CBC radio this morning where he added to the dovishness from yesterday’s release, saying “the economy is not overheated anymore and if inflation cools as projected, we won’t have to raise rates further.”

GBP/USD is slightly higher on the day, with no major events occurring. Given existing concerns on growth coupled with today’s ECB pause, it will be tough for the Bank of England to market further hawkish policy to combat their inflation problem.

USD/MXN is essentially unchanged on the day general USD strength is offset by better-than-expected unemployment figures in Mexico. The unemployment rate in September dropped by more than expected to 2.88% from a prior reading of 2.96%.

USD/BRL is marginally higher on the day even as the lower house voted to approve legislation that will tax the country’s wealthy. A bill that would tax offshore and exclusive funds is now set to move to the senate where it would need ratification before becoming law. The next Brazilian Central Bank rate decision is next Wednesday evening.