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Nasdaq-100: ⬆️ Buy

• Nasdaq-100 broke resistance area
• Likely to rise to resistance level 27000.00

Nasdaq-100 index recently broke the resistance area between the resistance level 26000.00 and the resistance trendline of the extended daily up channel from May.

The breakout of this resistance area accelerated the active short-term impulse wave iii of the impulse wave 5 from the start of Septembers.

Given the strong daily uptrend and rising daily Momentum, Nasdaq-100 index can be expected to rise to the next resistance level 27000.00 (target price for the completion of the active impulse wave iii).

Fed lowered the federal funds rate by 25 basis points to 3.75–4.00%, in line with expectations, but revealed a three-way split among policymakers. Governor Stephen Miran voted for a deeper 50bps reduction, while Kansas City Fed President Jeffrey Schmid preferred to hold rates steady. The outcome highlights differing views within the Committee over the balance between inflation control and downside risks to growth.

In its statement, the Fed offered no explicit forward guidance, reiterating that it will “continue to monitor incoming information” and stands ready to adjust policy as appropriate should new risks emerge.

The Committee described economic activity as expanding at a moderate pace, with job gains slowing and unemployment edging higher but still low through August. Inflation was noted as having moved up since earlier in the year and remaining “somewhat elevated.”

The Fed also acknowledged that uncertainty about the outlook remains elevated, with downside risks to employment having increased in recent months.

Full FOMC statement here.

Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.

In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting, and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.

• The Labour government will likely face a big fiscal hole in the upcoming budget. We expect they will close the gap and deliver some welcomed fiscal tightening for markets, even if it will be unpopular amongst voters.
• We remain negative on GBP as tailwinds from more sustainable fiscal policies will be counterweighed by negative growth impact and a USD negative environment.

On 26 November, the annual Autumn Statement will be presented in the UK accompanied by independent forecasts from the Office of Budget Responsibility (OBR), the UK fiscal watchdog. Chancellor Rachel Reeves faces a significant fiscal shortfall, amongst others due to an expected 0.3 percentage point cut in trend productivity growth by the OBR. This adjustment, which is bigger than analysts had predicted of 0.1-0.2 percentage points, deepens the fiscal hole by approximately another GBP12bn, based on estimates from the Institute of Fiscal Studies, bringing the total shortfall to GBP30-40bn (including a modest GBP10bn. headroom). However, factors such as higher inflation and wage forecasts, along with the recent sharp decline in Gilt yields, could help offset some of the impact if accounted for by the OBR.

The large fiscal shortfall makes it increasingly challenging for the Labour government to uphold its promise to freeze income tax rates, National Insurance contributions and VAT, the three main sources of revenue. Reeves has indicated potential tax rises and spending cuts blaming Brexit and the previous Conservative government for the fiscal and economic troubles. We believe Labour will aim to address the fiscal gap now with the next general election still distant to avoid the risk of more tax hikes later. As a result, we think the budget is set to alleviate some pressure in the Gilt market.

Key for Gilt markets and GBP FX will be whether the government might adjust fiscal rules to avoid tough decisions. One option could be advancing next year's rule change, allowing a 0.5% of GDP deficit, which would ease budget pressures but risk alarming Gilt investors. The government's ability to fully address the challenge and secure sufficient headroom will be critical. Keeping Labour's promise appears difficult and could lead to reliance on uncertain revenues from new taxes or less credible spending cuts, both negative for Gilts. Breaking promises by raising more predictable revenues such as the income tax would be positive. A 1 percentage point increase to the basic rate would raise GBP8bn. according to the UK tax authorities. Alternatively, a VAT hike, which Reeves hasn't ruled out, could boost revenue but will trigger higher inflation, at least in the short term and in turn put upward pressure on short end UK yields.

We stay negative on GBP FX. While a significant tightening of fiscal policy would alleviate some pressure in terms of the negative impact from unsustainable public finances, we highlight the negative growth impact. If we get a significant tightening, this will act as a further headwind for the UK economy and likely trigger more substantial easing from the BoE. Combined with a global investment environment characterised by a positive correlation to a USD negative environment, in our view, favours a weaker GBP. We expect EUR/GBP to trend higher the coming year, targeting the cross at 0.89 in 12 months.

EUR/GBP hit new 2025 high and held at the highest levels since May 2023 on Wednesday.

Steep upleg from Oct 22 extends into sixth straight day, as sterling came under increased pressure from shift in monetary policy expectations which sees BoE rate cut as early as November (the MPC meets next week).

The latest economic data showed that inflation held steady last month, earnings grew at the slowest pace in almost three years, and unemployment ticked higher, setting stage for policy easing, against previous forecasts for no rate cuts this year.

Growing UK budget concerns also add to Pound’s recent weak performance.

Firmly bullish daily studies support the action, though overbought stochastic and RSI touching the borderline of overbought territory, warning that bulls might be losing traction that contributes to scenario of profit taking after strong rally.

Overall picture remains bullish and suggests that limited dips would be positioning for fresh push higher.

Former tops /trendline at 0.8750/40 and rising 10DMA / broken Fibo 61.8% (0.8700 zone) offer solid supports which should ideally contain dips.

Res: 0.8817; 0.8835; 0.8875; 0.8900.
Sup: 0.8750; 0.8700; 0.8650; 0.8631.

Cable hit three-month low on Wednesday, extending the steep bear-leg which emerged after strong upside rejection at daily cloud, into second consecutive week.

Fresh bears broke through important support provided by 200DMA (1.3239) and cracked 1.3200 level that unmasks key short-term support at 1.3141 (Aug 1 low (Fibo 38.2% of 1.2999/1.3788).

Today’s break of former low of Oct 14 (1.3248) generated another bearish continuation signal (continuation of larger downtrend from Sep 17 peak (1.3725).

Bears need close below 200DMA to open way towards 1.3141 pivot, break of which to complete bearish failure swing pattern on weekly chart and signal potential deeper correction of 1.2999/1.3788 (January – June uptrend) and expose psychological 1.30 support.

The notion is supported by daily MA’s now in full bearish configuration and strong negative momentum, from the technical perspective, while shift in fundamentals (growing expectations for BoE rate cut this year against previous forecasts for staying on hold until the end of the year) also contributes bearish near- term stance.

Broken 200DMA reverted to initial resistance, followed by session high / falling 5DMA (1.3280/85), which should ideally cap potential upticks and guard 10DMA (1.3342).

Res: 1.3239; 1.3280; 1.3300; 1.3342.
Sup: 1.3162; 1.3141; 1.3100; 1.3000.

The Bank of Canada delivered an expected 25 basis point rate cut today, lowering the overnight rate to 2.25%—the bottom of the neutral range that would not add to or subtract from inflation pressures over time.

Beyond the rate cut itself, two themes stood out from today's announcement. First, the Bank adopted a clear holding bias, stating that "Governing Council sees the current policy rate at about the right level" assuming future economic and inflation data evolve largely in line with current projections.

Second, the Bank emphasized concerns about structural economic damage from trade disruptions, reducing the effectiveness of monetary policy as a tool in addressing weakening demand while maintaining inflation control.

Overall, our base case assumes no further rate reductions, as we expect a ramp up in fiscal stimulus (with more details to come in the federal budget next week) will do the bulk of the heavy lifting in the policy response to address tariff-related, concentrated economic weakness.

The BoC’s latest baseline economy projections are in line with ours

The BoC’s guidance that the overnight rate is not expected to be reduced further is contingent on the economic outlook evolving in line with their base case projections that were the first since January. The Bank had resorted to scenario analysis in April and July due to volatile U.S. trade policy.

The Bank's overarching assumption behind the projections is that current tariff measures will remain in place. Key estimates regarding these measures—including a roughly 6% average effective tariff rate imposed by the U.S. on Canadian exports, with the majority of exports remaining exempt due to CUSMA compliance—align directly with our own analysis.

As a result, there is substantial alignment between our forecasts and the central bank's outlook. Both anticipate slow but positive growth in the Canadian economy through the second half of this year, followed by moderate acceleration in 2026 as trade related uncertainty starts to fade.

Headline inflation is expected to remain close to the 2% target over the forecast horizon. However, we see upside risks to this baseline projection primarily from robust domestic demand, given household spending that has broadly held on to resilience to-date and expectation that weakening in the labour market could be drawing to an end.

The Bank of Canada anticipates upside risks mainly from trade-related factors, such as larger-than-expected cost increases from tariffs or sudden reductions in sectoral tariffs.

It see downside risks to the inflation projections from softer than expected domestic demand, or a sudden tightening in global financial conditions sparked by a correction in AI related stock market valuations that have been tied to resilient growth in the U.S. economy this year.

BoC expects lasting structural damage to the economy from the trade shock

Beyond this cycle, the Bank of Canada expects structural damage from ongoing trade disruptions. Combined with slower population growth, Canada's potential output is expected to expand at a reduced rate of 1.6% in 2025 and 1.0% in 2026, before recovering slightly to 1.3% in 2027.

This structural damage will reduce the productive capacity of the Canadian economy and erode the effectiveness of monetary policy. In simple terms, as the economy's capacity shrinks, it will become increasingly difficult for the Bank of Canada to lower interest rates to stimulate demand without risking that demand will exceed what the economy can produce, thereby causing inflation.

This highlights the urgency for fiscal policy to step up by helping expand the economy's capacity limits—a priority we expect will account for the bulk of new spending to be announced at the fall budget update on November 4.

Markets

The record rally on stock markets is once again name of the game today as US president Trump continues his Asian tour. He made a deal with South Korean president Lee where $150bn in shipbuilding investment and another $200bn earmarked for other investments amongst others are matched by the US capping tariff goods at 15%. Ahead of the European bell, more bilateral commitments between the US and China had already been announced including lower fentanyl-related tariffs and the first Chinese bulk buying of soybeans this season. We approach the big moment with the planned 3-hour meeting between presidents Trump and Xi Jinping at 3am CET (tonight) after which Trump takes the Air Force One back home following a busy Asian tour. Also in the US/China-mix: the export of Nvidia chips. The company rallies to a record-breaking $5tn valuation today and lifts AI spirits in the run-up to Q3 earnings releases starting tonight with Alphabet, Meta and Microsoft. The Nasdaq currently adds 0.66%, making it a weekly gain of more than 5%.

A second “risk management” 25 bps rate cut by the Fed is all but certain tonight. For now, the narrative stands that downside employment risks are building faster than upside inflation risks. Lack of US eco data might mean lack of Fed guidance for December and could temper the market reaction. We don’t expect Powell to actively push back against markets pricing an additional move in December though. The end to QT could steal the rate cut’s thunder instead. Powell announced it two weeks ago at the NABE conference amid commercial bank reserves at the central bank dwindling to below $3tn. That’s less than 10% of GDP Fed Waller suggested as a minimum some years ago. That ballpark figure was based on the liquidity squeeze in 2019 which saw a spike in the short-term SOFR interbank rate. The level of bank reserves back then had dropped below 8% of GDP. The SOFR (and other general collateral rates for that matter) in recent days climbed back above the Fed’s upper bound rate again. Apart from this week’s huge t-bill supply, it potentially suggests that we’re moving from a situation of abundant liquidity to an ample one. We expect the chair to be queried about it. The current roll-off cap for Treasuries stands at $5bn per month, a limited amount anyway. MBS’s are capped at $35bn but the monthly amount in practice is often lower.

Sterling suffers more losses after yesterday’s technical break beyond EUR/GBP 0.8768/69. Apart from rising BoE rate cut bets, there’s the approaching 2026 Budget deadline (one month away). Today, UK PM Starmer refused to rule out raising income tax, national insurance or VAT hinting at a break of the election manifesto promises which could significantly weigh on UK growth.

News & Views

The Bank of Canada lowered its policy rate to 2.25% from 2.5%. Today’s decision comes with the resumption of baseline growth and inflation forecasts instead of a scenario analysis. GDP should grow by 1.2% this year, followed by 1.1% and 1.6% in 2026 and 2027. The BoC expects a weak 2025H2 to be followed by a recovery from next year on. Canada’s labour market is considered soft with job losses building in trade-sensitive sectors and weak hiring elsewhere. Inflation was 2.4% in September, slightly higher than the BoC had anticipated. Its preferred measures of core inflation had been sticky around 3% but alternative gauges suggested underlying inflation remains around 2.5%. Inflationary pressures should ease in the months ahead, allowing CPI to remain near 2% over the policy horizon. The current policy rate level is said to be “about the right level to keep inflation close to 2% while helping the economy”, suggesting a pause or perhaps the end to the easing cycle, provided the BoC’s forecasts more or less materialize. That’s supporting Canadian swap yields (+3.6-5 bps) and the Canadian dollar. USD/CAD drops to 1.39.

Swedish GDP grew a consensus-smashing 1.1% q/q in Q3 of this year. The accompanying monthly series showed the dynamic easing towards the end of the quarter with September GDP falling marginally by 0.1% m/m. But that comes after a huge boost in August (+1.2% m/m) and doesn’t change the notion of Sweden’s economic recovery finally taking hold. GDP since September 2022 never grew faster than 0.2% and even declined in five out of the 12 quarters. The annual print improved from 0.9% to 2.4%, the best outcome in three years. The numbers should comfort the Riksbank. The central bank last month cut the policy rate to 1.75%. It referred to growth being weak “for a long time” and had to push forward the timing of a recovery multiple times. It wasn’t planning on cutting rates much (if any) further though and today’s release adds to that conviction. The SEK strengthens to EUR/SEK 10.89.

The Bank of Canada (BoC) cut its policy rate to 2.25%, in line with market expectations.

The decision was accompanied by an updated forecast, the first since January as “the effects of US trade actions on economic growth and inflation” are “somewhat clearer”. The bank now expects the economy will grow by 1.2% in 2025, 1.1% in 2026 and 1.6% in 2027. These figures are very similar to our forecast.

The Bank expects that inflation will moderate in the coming months and that CPI inflation will “remain near 2% over the projection horizon.” Notably, the emphasis on underlying inflation remains and that it is holding “around 2.5%”.

Looking forward, should the economy and inflation evolve as expected “Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment”. Of course, they leave room to respond should circumstances change.

Key Implications

The outlook shows a gradual uptake of excess capacity and inflation stabilizing, a scenario that would suggest no more easing is required. However, despite the effects of the trade shock being better understood, the outlook is replete with uncertainty – not least because CUSMA negotiations are set to ramp up next year. Stabilization at 2.25% is our base case on where the policy rate will hold, but we acknowledge that risks abound.

The Bank is now at the bottom end of their estimated neutral range, and a pause is reasonable. While trade represents a downside risk to the outlook, the upcoming federal budget could well represent the upside risk. PM Carney is expected to chart out a vision for the economy to offset some of the structural change the Bank is unable to address.  The structure and timing of potential outlays could materially affect the medium-term outlook for the economy, and the Bank’s decision making.