Sample Category Title

• BoJ expected to leave rates at 0.25%
• Lowest inflation since April at 2.5%
• Yen dives to new 3-month low
• Decision comes out on Thursday at 03:00 GMT

BoJ to leave rates unchanged

The Bank of Japan (BoJ) is anticipated to maintain its existing interest rates during the policy meeting on October 31. This decision reflects Governor Kazuo Ueda’s prudent strategy, highlighting the necessity to evaluate risks, especially those associated with the US economy and fluctuating markets. The Bank of Japan earlier terminated its negative interest rate policy in March and elevated its short-term policy target to 0.25% in July. Nonetheless, with inflation consistently near 2% and no imminent indications of escalation, the BoJ is not hastening to execute any rate increases.

Quarterly report

The Bank of Japan's quarterly report, which will feature updated GDP and inflation projections, is expected to offer insights into the timing of forthcoming interest rate increases. Analysts anticipate that the BoJ will emphasize risks, including sluggish global growth and market volatility, which may reduce the probability of a year-end rate increase. The post-meeting briefing by Governor Ueda will be scrutinized for indications concerning the speed and timing of forthcoming interest rate increases.

Inflation

As of September, Japan's annual inflation rate is 2.5%, a decrease from 3.0% in the preceding month. This signifies the lowest inflation rate since April. The decline is ascribed to subdued rises in electricity and gas prices, together with tempered expenses for food, furnishings, transportation, and cultural activities.

Japan's inflation rate has been comparatively low in relation to other G7 nations, attributable in part to government-imposed price controls, an elderly demographic, and negative interest rates. These elements have contributed to maintaining inflation stability amid global economic pressures.

Recent Elections and Political Landscape

The general election held on October 27, caused a notable transformation in Japan's political landscape. Prime Minister Shigeru Ishiba's governing coalition lost its majority in the lower chamber for the first time in 15 years. This loss has generated political uncertainty, hindering attempts to retract monetary stimulus. The election outcomes have compelled the ruling Liberal Democratic Party (LDP) to pursue coalitions with minor opposition parties to establish a government.

Economic Outlook for 2025

The economic forecast for Japan in 2025 is cautiously hopeful, as the International Monetary Fund (IMF) anticipates a small recovery fueled by growing real earnings and heightened consumption. Notwithstanding obstacles including supply chain interruptions and a waning influx from tourism, economic growth is anticipated. Important factors influencing this outlook include the anticipated increase in wages, which will boost household purchasing power and domestic demand, as well as the Bank of Japan's likely continuation of policy normalization, potentially leading to further interest rate hikes. Although headline inflation is anticipated to decelerate, core inflation may continue to be bolstered by increased wage growth. Moreover, political stability will be crucial, as prospective leadership changes may influence economic policies and investor confidence. Japan is shifting from stagnation to modest growth, helped by structural reforms and policy modifications.

Yen remains under pressure

If the BoJ sustains its current interest rates, as anticipated, the yen may not experience substantial immediate fluctuations. Any indications of impending rate increases may bolster the yen as investors foresee enhanced profits on yen-denominated assets. The yen has lost more than 10% versus the dollar over the last one-and-a-half months.

The dollar/yen is holding slightly beneath the three-month high of 153.90 with strong resistance near the 61.8% Fibonacci retracement level of the down leg from 161.94 to 139.60 at 153.40. More gains could lead the market toward the 155.20 bar. Otherwise, a move south may drive the market toward the 200-day simple moving average (SMA) at 151.50.

Since there are no signs of raising interest rates any time soon, the yen will likely keep falling against the dollar. However, if the yen's value continues to decline, officials are likely to hike interest rates sooner rather than later.

• USDCAD in massive bullish run this month
• MACD and RSI hold in overbought areas

USDCAD added more than 3% so far this month, posting an incredible bullish rally with no notable bearish waves. The price is currently approaching the previous 22-month high of 1.3947 with the next resistance taking place at 1.3975, achieved in October 2022. Steeper bullish run could take the market until the 1.4100 psychological level, registered in February 2016. But traders need to be cautious at the 1.4000 handle first.

On the other hand, a bearish retracement beneath the 1.3890 support could send traders towards the 20-day simple moving average (SMA) at 1.3790 ahead of the 1.3745 bar. More important levels are coming within the area of 1.3620-1.3650, which encapsulates the 50- and 200-day SMAs.

From a technical perspective, the MACD oscillator is holding above its trigger and zero lines but looks to be losing some steam. The RSI indicator is still ticking higher in the overbought territory.

To conclude, USDCAD is gaining significant ground, erasing the downward wave from 1.3947 to 1.3440. A move beyond 1.3975 could endorse the bullish scenario in the broader outlook.

The U.S. economy expanded by 2.8% quarter-on-quarter (q/q, annualized) in the third quarter, a touch lower than the consensus forecast of 3.0%.

Consumer spending accelerated at its fastest pace since the first quarter of 2023, rising 3.7% q/q. The gain was driven by a sharp rise in goods spending (+6.0% q/q), while spending on services grew by 2.6%.

Business investment rose 3.3% q/q, thanks to another strong quarterly gain in equipment spending (+11.1% q/q). Meanwhile, spending on structures fell by 4.0% q/q, while investment in intellectual property products was relatively flat – up just 0.7% q/q – for the second quarter in a row.

Residential investment (-5.1% q/q) remained a drag on Q3 growth, as both home sales and homebuilding came under further pressure alongside still elevated interest rates.

Government spending rose 5.0% q/q – its strongest quarterly gain in a year – largely stemming from an outsized gain in federal defense outlays (+14.9% q/q). State & local government spending (+2.3% q/q) was also higher last quarter.

On international trade, both imports (+11.2% q/q) and exports (+8.9% q/q) notched sizeable gains, but a larger increase in the former resulted in net trade subtracting 0.6 pp from GDP. Inventory investment (-0.2 pp) was also a small net drag on growth last quarter.

Final domestic demand was up a healthy 3.5% q/q, an acceleration from Q2's gain 2.8% q/q.

Core PCE inflation – the Fed's preferred inflation gauge – slowed to 2.2% q/q (annualized), a notable deceleration from Q2's 2.8%.

Key Implications

Another solid quarter for the U.S. economy, with underlying domestic demand pushing well above 3% and accounting for all of last quarter's growth. Beyond the housing market, there are very few signs that elevated interest rates are exerting any meaningful drag on domestic activity.

That said, economic growth is likely to round out the year on a softer note, as a further cooling in the labor market leads to some moderation in consumer spending. Equipment investment also looks poised for some giveback after two consecutive quarters of very healthy gains, while Q3's gain in federal defense spending is unlikely to repeated in Q4. We also can't forget that fourth quarter growth is likely to see some distortions stemming from hurricane's Helene and Milton, which have likely displaced some near-term activity across parts of the Southeast. However, history shows that the clean-up and rebuilding efforts that occur following a natural disaster tend to more than offset any lost output.

Bigger picture, the U.S. economy still looks poised to achieve a soft landing. Economic growth is expected to steady closer to 2% in 2025, while inflation is quickly closing in on the Fed's 2% target. This should allow the FOMC to continue gradually reducing its policy rate over the next year, and potentially have it return to closer to its long-run neutral rate of 3% by Q4-2025.

Daily Pivots: (S1) 152.80; (P) 153.33; (R1) 153.92; More...

Intraday bias in USD/JPY is turned neutral first as consolidation from 153.87 is extending. Further rally is expected as long as 55 D EMA (now at 148.69) holds. Sustained trading above 61.8% retracement of 161.94 to 139.57 at 153.39 will pave the way to retest 161.94 high.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8646; (P) 0.8672; (R1) 0.8700; More…

Outlook in USD/CHF remains unchanged and intraday bias stays neutral for consolidation below 0.8699 temporary top. Further rally remains in favor as long as 55 D EMA (now at 0.8608) holds. On the upside, decisive break of 38.2% retracement of 0.9223 to 0.8374 at 0.8698 will argue that fall from 0.9223 has completed after defending 0.8332 low. Further rally should then be seen to 61.8% retracement at 0.8899 next.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with fall from 0.9223 as the second leg. Strong support could be seen from 0.8332 to bring rebound. Yet, overall outlook will continue to stay bearish as long as 0.9243 resistance holds. Firm break of 0.8332, however, will resume larger down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 1.2976; (P) 1.2996; (R1) 1.3033; More...

GBP/USD dips notably today but stays in range above 1.2906, and intraday bias remains neutral. Further decline is expected as long as 1.3070 minor resistance holds. Below 1.2906 will target 61.8% retracement of 1.2298 to 1.3433 at 1.2732. However, considering bearish divergence condition in 4H MACD, firm break 1.3070 resistance will indicate short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, considering mildly bearish divergence condition in D MACD, a medium term top is likely in place at 1.3433 already. Price actions from there are seen as correction to whole up trend from 1.0351 (2022 low). Deeper decline would be seen to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.

Daily Pivots: (S1) 1.0783; (P) 1.0804; (R1) 1.0840; More...

EUR/USD recovered today but stays in range of 1.0760/0871. Intraday bias remains neutral and further decline is still expected. On the downside, break of 1.0760 will resume the fall from 1.1213 to 61.8% retracement of 1.0447 to 1.1213 at 1.0740. Firm break there will target 1.0601 support next. However, considering bullish convergence condition in 4H MACD, break of 1.0871 will indicate short term bottoming, and turn bias back to the upside for 55 D EMA (now at 1.0946).

In the bigger picture, price actions from 1.1274 (2023 high) are seen as a consolidation pattern to up trend from 0.9534 (2022 low), with fall from 1.1213 as the third leg. Downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404, to bring up trend resumption at a later stage.

Dollar strengthened in the early session, buoyed by surprisingly strong ADP private sector job data that far outpaced expectations. This robust employment figure has bolstered optimism for Friday’s upcoming non-farm payrolls report, which many anticipate will confirm sustained strength in the US labor market. With job growth remaining solid, Fed may feel less pressure to ease its policy aggressively in the near term. However, Dollar’s gains are somewhat tempered by Q3 GDP data, which came in slightly below forecasts, indicating some moderation in overall growth momentum.

Meanwhile, Euro also found support and rallied modestly after Eurozone GDP for Q3 exceeded expectations. Germany, in particular, delivered a surprise by reporting economic growth, allowing it to narrowly avoid a technical recession. This economic resilience lessens the immediate need for ECB to consider more aggressive policy easing in the coming meeting.

In currency markets for the week so far, Euro stands out as the strongest performer, as it's consolidating recent losses against a resilient Dollar, which holds second place. British pound follows as the third-strongest currency. Yen lags at the bottom of the rankings, while Aussie and Swiss Franc also underperformed. Kiwi and Loonie are positioning in the middle.

Technically, Gold record-breaking trend resumed after brief consolidations. Outlook will now stay bullish as long as 2716.90 support holds. Next targets are 138.2% projection of 1984.05 to 2449.83 from 2293.45 at 2937.15, and then 161.8% projection at 3047.08.

In Europe, at the time of writing, FTSE is down -0.56%. DAX is down -1.27%. CAC is down -1.54%. UK 10-year yield is down -0.088 at 4.232. Germany 10-year yield is down -0.002 at 2.334. Earlier in Asia, Nikkei rose 0.96%. Hong Kong HSI fell -1.55%. China Shanghai SSE fell -0.61%. Singapore Strait Times fell -0.88%. Japan 10-year JGB yield fell -0.0239 to 0.953.

US Q3 GDP growth slows to 2.8% annualized, vs exp 3.0%

US economy expanded at an annual rate of 2.8% in the third quarter, slightly below the expected 3.0% and down from the previous quarter's 3.0% growth.

This increase in real GDP was primarily supported by stronger consumer spending, exports, and federal government expenditures. However, a rise in imports, which detracts from GDP, partially offset these gains.

Inflation pressures moderated, with PCE (PCE) Price Index rising by 1.8%, down from 2.5% in Q2 and well below the expected 2.7%.

US ADP jobs rises 233k, hiring robust and resilient

US ADP report revealed robust private sector job growth in October, with employment rising by 233k, well above the forecasted 110k. Sector-wise, service-providing jobs led the way with a 211k increase, while goods-producing jobs added 22k.

By company size, large businesses contributed the most with 140k jobs, followed by medium-sized firms at 86k, and small companies at 4k.

Wage growth trends continued to ease, with year-over-year pay gains for job-stayers slowing to 4.6% and for job-changers to 6.2%.

ADP Chief Economist Nela Richardson highlighted the labor market’s resilience, noting that “even amid hurricane recovery, job growth was strong in October.” As the year approaches its end, the U.S. hiring remains "robust and broadly resilient.”

Eurozone GDP grows 04% qoq in Q3, Germany avoids recession

Eurozone GDP rose by 0.4% qoq in Q3, surpassing the anticipated 0.2% qoq growth. A notable surprise came from Germany, where GDP grew by 0.2% qoq against expectations of a -0.1% qoq contraction, allowing Europe’s largest economy to narrowly avoid a recession. France also outperformed, with GDP increase of 0.3% qoq for the quarter.

For the EU as a whole, GDP expanded by 0.3% qoq. Among member states, Ireland posted the strongest growth at 2.0% qoq, followed by Lithuania at 1.1% qoq and Spain at 0.8% qoq.

However, some economies faced contraction, with Hungary’s GDP declining by -0.7% qoq, Latvia’s by -0.4% qoq, and Sweden’s by -0.1% qoq.

Year-over-year growth was mixed across the EU, with positive annual growth rates reported in seven countries, while six saw negative growth.

Swiss KOF falls to 99.5 in Oct, recovery very hesitant

Swiss KOF Economic Barometer declined sharply from 104.5 to 99.5 in October, missing the expected 105.0 and falling below the 100-point threshold for the first time since January. This shift suggests a weakening outlook for the Swiss economy, with the KOF describing the recovery as “very hesitant.”

In October, indicators across all production-related sectors, including manufacturing, financial and insurance services, hospitality, and construction, showed declines.

Demand-side indicators, such as those for foreign and consumer demand, remained stable but showed little promise of stimulating stronger economic momentum.

Australia’s Q3 CPI slows to 2.8% yoy, goods prices fall but services edge higher

Australia’s Q3 CPI came in softer than anticipated, with consumer prices rising just 0.2% qoq, down from 1.0% qoq in Q2 and below expectations of 0.3% qoq. This marks the lowest quarterly increase since Q2 2020.

On an annual basis, CPI slowed from 3.8% yoy to 2.8% yoy, comfortably returning to RBA's target range of 2-3% and registering the lowest year-over-year inflation rate since Q1 2021.

Core inflation, measured by trimmed mean CPI, showed resilience with a 0.8% qoq rise, down from Q2's 0.9% qoq, but slightly above the expected 0.7% qoq. Annually, trimmed mean CPI slowed from 3.9% yoy to 3.5% yoy, aligning with market expectations.

The breakdown shows a notable shift in price pressures: annual goods inflation dropped sharply from 3.2% yoy to 1.4% yoy, largely due to substantial declines in electricity and fuel costs. However, services inflation edged up slightly from 4.5% yoy to 4.6% yoy, driven by higher costs in rents, insurance, and child care.

September monthly CPI echoed this trend, slowing significantly from 2.7% yoy to 2.1% yoy, undershooting expectations of 2.3% and marking the smallest annual increase since July 2021.

This softer inflation data should provide the RBA with room to consider easing its policy stance in the coming months, should inflation remain within target.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0783; (P) 1.0804; (R1) 1.0840; More...

EUR/USD recovered today but stays in range of 1.0760/0871. Intraday bias remains neutral and further decline is still expected. On the downside, break of 1.0760 will resume the fall from 1.1213 to 61.8% retracement of 1.0447 to 1.1213 at 1.0740. Firm break there will target 1.0601 support next. However, considering bullish convergence condition in 4H MACD, break of 1.0871 will indicate short term bottoming, and turn bias back to the upside for 55 D EMA (now at 1.0946).

In the bigger picture, price actions from 1.1274 (2023 high) are seen as a consolidation pattern to up trend from 0.9534 (2022 low), with fall from 1.1213 as the third leg. Downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404, to bring up trend resumption at a later stage.

US economy expanded at an annual rate of 2.8% in the third quarter, slightly below the expected 3.0% and down from the previous quarter's 3.0% growth.

This increase in real GDP was primarily supported by stronger consumer spending, exports, and federal government expenditures. However, a rise in imports, which detracts from GDP, partially offset these gains.

Inflation pressures moderated, with PCE Price Index rising by 1.8%, down from 2.5% in Q2 and well below the expected 2.7%.

Full US GDP advance release here.

US ADP report revealed robust private sector job growth in October, with employment rising by 233k, well above the forecasted 110k. Sector-wise, service-providing jobs led the way with a 211k increase, while goods-producing jobs added 22k.

By company size, large businesses contributed the most with 140k jobs, followed by medium-sized firms at 86k, and small companies at 4k.

Wage growth trends continued to ease, with year-over-year pay gains for job-stayers slowing to 4.6% and for job-changers to 6.2%.

ADP Chief Economist Nela Richardson highlighted the labor market’s resilience, noting that “even amid hurricane recovery, job growth was strong in October.” As the year approaches its end, the U.S. hiring remains "robust and broadly resilient.”

Full US ADP employment release here.