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Switzerland’s KOF Economic Barometer rose more than expected in October, advancing from 98.0 to 101.3 against forecasts of 99.0. The index’s move above the 100-threshold suggests that short-term prospects are now slightly above the long-term average, hinting at a firmer growth backdrop heading into year-end.

The KOF Institute noted that most indicator groups contributed positively to the uptick. In particular, manufacturing, financial and insurance services, and other service industries all displayed a more favorable outlook. However, the report pointed out a setback in private consumption, underscoring that household spending remains a relative weak spot even as business sentiment strengthens.

Full Swiss KOF release here.

In focus today

In the euro area, today brings a packed agenda with the ECB meeting, the first Q3 GDP estimate, October flash inflation for Germany and Spain, and unemployment data. We expect the ECB to hold rates steady at 2.0%, with Lagarde signalling no change in the outlook, aligning with market expectations. Growth risks appear balanced, and while no rate cuts are anticipated in 2026, they cannot be completely ruled out. We expect euro area GDP to have expanded 0.1% q/q (1.2% y/y) in Q3, supported by stable PMI readings. Spain's strong performance, with 0.6% q/q growth driven by robust domestic demand and rising employment, provided a boost, while Ireland's slight contraction of 0.1% q/q highlights the ongoing effects of earlier export front-loading. We expect the unemployment rate to have stayed unchanged at 6.3% in September amid a steady labour market. We get the first indications of October inflation as Germany and Spain release flash estimates ahead of the euro area data tomorrow.

Following strong Swedish GDP data and a sharp PMI rise, today's NIER survey will be key in confirming economic improvement. Collected earlier this month, the data reflects the Riksbank's September rate cut and the government's expansionary budget. A lack of further improvement in household sentiment would be disappointing. We're also watching corporate inflation expectations and pricing plans as key inflation indicators.

Overnight, Japan will release data on retail sales and October Tokyo inflation. Private spending has slowed considerably over the recent months as food inflation has eroded purchasing power. However, with wage growth gradually improving, we will watch for signs of a recovery in spending.

Overnight China will release the official PMI figures for October, covering both manufacturing and non-manufacturing. In September, the official manufacturing PMI lagged behind the private (RatingDog PMI). This month, we expect a slight improvement, with the manufacturing PMI edging above the 50 threshold from 49.8 in September. Meanwhile, the non-manufacturing PMI has remained stable for months, and we anticipate a similar trend in October, weighed down in part by weakness in the construction sector.

Economic and market news

What happened overnight

Following US-China trade talks, Trump and Xi indicated progress towards stabilising trade relations, highlighting a 'basic consensus' on key issues such as soybean purchases, rare earth exports, and fentanyl trade. According to comments from the US-side, Trump plans to lower tariffs on China to 47% from 57%, while Beijing agreed to resume US soybean imports and address fentanyl trade. However, export restrictions on US microchips remain unresolved, and Taiwan was reportedly not discussed. Trump plans another meeting with Xi in China next April. Despite marking a temporary trade war de-escalation, the deal is unlikely to significantly impact markets today.

The Bank of Japan (BoJ) kept rates unchanged in a 7-2 vote, with Takata and Tamura favouring a hike. Around 4bp of hikes were priced in before the meeting, leading to further yen weakness The BoJ's outlook remains unchanged, forecasting modest growth, inflation above target this year, 1.8% in 2024, and 2.0% in 2027. We maintain a hawkish BoJ outlook, expecting the next hike in December, contingent on improving wage and spending data. Attention now shifts to Governor Ueda's 07.30 CET press conference.

In the Netherlands, the centrist D66 party made significant gains in the Dutch elections, positioning itself as a likely leader in forming a government after the far-right PVV, led by Geert Wilders, lost support. With 76 seats needed for a parliamentary majority, at least four parties will be required to form a coalition, likely excluding Wilders' PVV, as mainstream parties have ruled out working with him. Coalition talks, which are typically tough, are expected to take months.

What happened yesterday

In the US, the Fed cut its policy rate by 25bp, as expected, and announced the end of QT on 1 December, neutralizing MBS runoff with T-bill net purchases. Powell delivered a hawkish message, emphasising that a December rate cut is far from certain due to differing committee views and a growing sentiment to delay further cuts. This led to a repricing of rate expectations, with the implied probability of a December cut dropping from over 90% to around 60%. EUR/USD fell to 1.16. We maintain our view of a pause in December and a cut in January. For details see Research US - Fed review: Hawkish cut, 29 October.

In Sweden, the GDP indicator for Q3 exceeded expectations, showing growth of 1.1% q/q and 2.4% y/y. Notably, three of the past four quarters have recorded positive GDP growth. If Q3 develops in line with the indicator, it would reinforce the recent upward-sloping trend - a welcome development after a prolonged period of stagnation. Our view is that the economy will continue to grow gradually from here.

In Norway, September retail sales fell 0.5 % m/m s.a., marking the first monthly decline in 2025. Gasoline was the main driver; excluding it, the drop was 0.2%. Despite supportive factors of higher real wages, low unemployment and lower mortgage rates, the decline was broader based among components but remains moderate with no major concerns.

Equities: Equities were virtually unchanged at yesterday's close relative to Tuesday's close. However, it was a zig-zag reaction during the Fed's press conference, erasing earlier gains from the day. Particularly Powell's hawkish message on December policy rate sent equities lower. Overnight, the Trump-Xi meeting was concluded with a partial deal, albeit an amicable tone was conveyed on both sides of the table. Trump even said he had an "amazing" meeting. S&P futures dropped about 0.6% following the conclusion of the meeting, albeit has recovered slightly following Trump's comment. Asian shares held up better and have recovered the knee-jerk reaction lower.

The much-awaited Q3 earnings of three of the Mag7 companies all surprised positively on the earnings relative to consensus, to a very significant degree. Google posting an earnings surprise around 30%, particularly driven by a surge in demand for cloud and AI services, while Microsoft was closer to 1%. And that seems to be the real story across the three reports; data centres and cloud services where e.g. Microsoft are lacking capacity.

We are now roughly half-way through the Q3 earnings reports, and taking stock of it seems clear that we are seeing a healthy earnings season, with better cyclical stocks' earnings reports than defensives.

FI and FX: A 25bp cut by the Fed and a halt to the QT program was followed by an unchanged rate decision from the Bank of Japan early this morning. ECB is expected leave the deposit rate unchanged at 2.0% when they announce their policy rate decision later today. Finally, Trump and Xi Jiping seemingly had a constructive meeting, resulting in concessions from both sides.

Markets

“A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.” A strongly divided committee (on the near term future) decided to implement a back-to-back 25 “risk management” bps rate cut yesterday, but in no way wanted to put the Fed policy on a preset course going into the final FOMC meeting of this year. A better flow of data would come in handy. Two Fed governors dissented against the 25 bps rate cut (Fed Miran in favour of 50 bps; Kansas City Fed Schmid calling for unchanged decision). At 3.75%-4%, the Fed’s policy rate for the first time entered the 3%-4% zone which the majority of Fed governors in the September dot plot indicated as neutral territory, though Fed Chair Powell personally still calls it moderately restrictive. Throughout the presser, Powell on several occasions placed himself in the camp of those who seem willing to proceed with another rate cut in December, but he stressed that Minutes of yesterday’s meeting will show the very strong division within the FOMC making the December outcome too close to call for now. In general terms, Powell explained that a neutral position is the one you’re looking for when the dual Fed’s mandate (downside risks to the labour market vs upward inflation risks) calls for opposite policy action. The labour market hasn’t been significantly deteriorating the past four weeks and Powell suggested that more signs of labour market strengthening or even stabilizing would certainly play into the central bank’s decisions going forward. More hawkish members inside the Fed already point out that the Fed’s tools can’t help the labour market when (a sharp drop in) supply (especially migration) is the bigger/only problem. It means that less jobs are necessary overall, so no need in stimulating demand. Powell noted though that job creation is very low as well, putting the labour market in its current curious stable state. Inflation away from tariffs (goods prices) is not so far from the Fed’s goal though according to Powell (2.3%-2.4% vs 2.8% Y/Y actual core PCE). The base case remains that tariff inflation will be a one-time increase. It helps that the labour market isn’t tight to avoid second-round effects while inflation expectations are currently under control as well. He also pointed out that housing services inflation has been coming down and is expected to continue to come back. Apart from the interest rate decision, the FOMC decided to stop its quantitative tightening process from December 1st. Since June 2022, assets in the bond portfolio declined by $2.2tn. In a next phase, the Fed wants to keep its total balance sheet stable. That implies that reserves will continue to shrink mechanically as other balance sheet categories grow in a natural way. Proceeds from maturing US Treasuries and MBS will be reinvested in US T-bills, shortening the duration of the asset portfolio to better match it with the duration of the outstanding universe of US T's. At some point down the future, the Fed will return to gradually growing its reserves to keep up with the size of the banking system and the size of the economy. That would be the final process of the Fed’s normalization process.

The US yield curve started bear flattening from the start of Powell’s Q&A with US yields adding 8.5 bps (30-yr) to 10.8 bps (2-yr) as money markets trimmed bets on a December 25 bps rate cut from 100% to 70%. The dollar initially profited from the rate support with EUR/USD dipping from 1.1660 to 1.1580. The move is already partly undone this morning as the Xi-Trump meeting ended. GBP/USD tested key support at 1.13140 with GBP weakness at play as well. USD/JPY moved in two steps from 152 to 153. USD-strength was followed by JPY-weakness after the BoJ kept its policy rate unchanged at 0.5% in the same 7-2 split vote as September. The BoJ kept its GDP and CPI forecast broadly unchanged though the increase in next fiscal year’s core CPI prognosis from 1.9% to 2% is meaningful. The BoJ narrative remains the same: preparing for a next rate hike in due time. Between now and December, the BoJ receives two months’ worth of additional data. The market-implied probability of such move stands at 45%. US stock markets returned part of trade/AI-driven gains with key indices closing between 0.16% lower (Dow) and 0.55% higher (Nasdaq). Equity futures are mixed overnight as they have to digest more news. Microsoft (strong numbers, but splitting hairs on computing capacity crunch; -4%) and Meta (good numbers, but huge Q3 tax bill and concerns about overspending on AI; -7%) shares lose ground following Q3 earnings releases, while Alphabet (big beat, huge capex effectively fueling growth; +6%) makes clear advances. Finally, US President gave a debrief on his encounter with Xi Jinping. He rated the meeting a 12 out of 10 with the two agreeing to meet again in China in April. Most other headlines matched chatter in the run-up. US tariffs on China will be 47%, down from 57% because of lower fentanyl-related charges. He touted agreement on soy beans and other agricultural products, no roadblock on rare earths, discussions on chips and the postponement of US shipbuilding probes. An official statement will be released later. Today’s main question is whether the hawkish Fed rate cut, mixed earnings reaction to big tech and expectations-matching Trump-Xi Summit are sufficient to keep the risk rally going.

A Federal Reserve (Fed), a Bank of Canada (BoC) and a Bank of Japan (BoJ) decision, an ‘amazin’ meeting between Trump and Xi, and three Big Tech earnings have landed on the headlines in the past 24 hours.

As widely expected, the Fed lowered interest rates by 25 basis points yesterday and announced it will end QT from December 1st — by reinvesting maturing Treasuries fully rather than letting them roll off. But Powell dampened the mood, saying that “a further reduction of the policy rate at the December meeting is not a foregone conclusion”, even though markets had priced in a 90 % probability of another cut. That hurt sentiment.

The US 2-year yield — which best captures Fed expectations — jumped 13 bps to above 3.60%, while the probability of a December cut fell to 70%. The US Dollar rallied across the board. Among majors, sterling was one of the hardest hit: cable slipped below its 200-DMA and will likely remain under pressure until the Autumn Budget. The USD/CAD dived to its 50-DMA after the BoC announced a 25 bp cut but recovered as the Bank signaled it’s probably done easing this cycle. The EUR/USD briefly dipped below 1.16, though the move didn’t breach any key technical levels; the European Central Bank (ECB) is expected to keep rates unchanged at today’s meeting. Meanwhile, the USD/JPY extended gains to the doorstep of 153 in Tokyo this morning as the BoJ kept its policy rate unchanged. The BoJ remains committed to further normalization — so more hikes — but expects inflation to ease from 2.7% to 1.8% next year, hinting they’re not in a hurry.

In summary, the US Dollar is stronger on a hawkish readjustment in Fed expectations, and the rest of the G7 complex could feel pressure in the coming weeks — especially sterling on budget concerns. Yields could rise further to reflect the new reality of an uncertain December cut.

And prospects of fewer or slower rate cuts from the Fed don’t thrill risk traders. Equity markets sold off on Fed announcement, with the S&P 500 and Nasdaq retreating sharply after hitting all-time highs at the open.

Happily, Nvidia was there to save the day! The company became the first in history to reach a $5 trillion valuation after CEO Jensen Huang announced a series of new deals in and beyond the US — and even beyond the chip industry. The Nokia partnership stood out, signaling that Nvidia is stepping into communication and networking to ensure that the massive data flows generated by AI applications don’t get stuck on outdated networks. Huang wants networks to be AI-driven — able to sense and manage data traffic to avoid congestion and reduce processing times.

The company remains a step ahead of the game — no one can deny that — and continues fighting for dominance despite others like Qualcomm joining the race. A small bump on the road, though: the Trump–Xi meeting might have been “amazing,” but the two leaders reportedly didn’t discuss Blackwell chip exports to China — a disappointment to some. Still, Huang has repeatedly told investors to assume China revenue will be zero — so anything above that is just the cherry on top.

Bottom line: Nvidia gives chills to those who don’t own it and attracts criticism from those who don’t — but the truth is, the earnings keep up.

You know who’s struggling to keep up? Apparently, Microsoft. Despite massive AI infrastructure spending, Microsoft said its Azure cloud unit hit capacity constraints last quarter. Revenue, cloud growth and earnings beat expectations, but the need for even more spending to meet insatiable cloud demand discouraged investors — sending the stock 4% lower in after-hours trading.

A similar reaction followed Meta’s results. Meta reported better-than-expected revenue and adjusted earnings but said it must spend more aggressively on AI next year to avoid “underinvesting.” The stock plunged more than 7%.

Google, however, pulled it off. Revenue surpassed the $100 billion mark, EPS came in far above expectations, and the 34% jump in Cloud revenue pleased investors. They also pledged to keep spending on AI, but Google’s growth in cloud revenue pleased investors more than Azure’s 39% growth versus 37% expected.

Today, Apple and Amazon will reveal how they performed last quarter, with AWS in particular in the spotlight.

Beyond earnings, the ECB will announce its policy verdict and will likely repeat that policy is “in the right place” for now.

And finally, Trump called his meeting with Xi “amazing and outstanding” — news that somewhat offsets yesterday’s Fed disappointment, though not enough to suggest a positive start for US indices this morning.

Daily Pivots: (S1) 200.71; (P) 201.38; (R1) 202.20; More...

Intraday bias in GBP/JPY is turned neutral first with current recovery. Price actions from 205.30 so far suggests that it's merely a consolidation pattern, and larger rally is not complete. On the upside, break of 204.22 will affirm near term bullishness and target 205.30 high next. Nevertheless, below 200.54 will extend the fall from 205.30 towards 197.47 key structural support.

In the bigger picture, price actions from 208.09 (2024 high) are seen as a corrective pattern which might have completed at 184.35. Firm break of 208.09 high will resume the up trend from 123.94 (2020 low). Next target is 61.8% projection of 148.93 to 208.09 from 184.35 at 220.90. However, decisive break of 197.47 support will dampen this view and extend the corrective pattern with another fall.

Daily Pivots: (S1) 176.67; (P) 177.14; (R1) 177.64; More...

EUR/JPY's rally resumed after brief consolidations and intraday bias is back on the upside. Current up trend should target 61.8% projection of 161.06 to 173.87 from 172.24 at 180.15 next. On the downside, below 176.60 will turn bias neutral again. But overall outlook will remain bullish as long as 174.80 support holds, in case of retreat.

In the bigger picture, up trend from 114.42 (2020 low) is in progress and should target 61.8% projection of 124.37 to 175.41 from 154.77 at 186.31. Firm break of 172.24 support will suggests that it has turned into consolidations again. But still, outlook will continue to stay bullish as long as 55 W EMA (now at 167.87) holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8773; (P) 0.8796; (R1) 0.8814; More…

Intraday bias in EUR/GBP remains on the upside for 0.8867 fibonacci level. Decisive break there will carry larger bullish implications. On the downside, below 0.8718 minor support will turn intraday bias neutral again first. But near term outlook will now stay bullish as long as 0.8654 support holds, in case of retreat.

In the bigger picture, rise from 0.8221 medium term bottom is seen as a corrective move. While further rally cannot be ruled out, upside should be limited by 61.8% retracement of 0.9267 to 0.8221 at 0.8867. Firm break of 0.8654 support will be the first sign that this corrective bounce has completed. However, decisive break of 0.8867 will suggest that EUR/GBP is already reversing whole decline from 0.9267 (2022 high).

Daily Pivots: (S1) 1.7575; (P) 1.7648; (R1) 1.7715; More...

Intraday bias in EUR/AUD remains on the downside at this point. Firm break of 1.7569 support will confirm that pattern from 1.8554 already in its third leg, and target 1.7245 next. On the upside, above 1.7717 minor resistance will turn intraday bias neutral and bring consolidations first, before staging another decline.

In the bigger picture, price actions from 1.8554 medium term top are seen as a corrective pattern. Sustained break of 55 W EMA will suggest that it's correcting the whole rally from 1.4281 (2022 low). In this case, deeper decline would be seen to 38.2% retracement of 1.4281 to 1.8554 at 1.6922. Nevertheless, strong rebound form 55 W EMA will likely bring resumption of the up trend sooner.

Daily Pivots: (S1) 0.9250; (P) 0.9270; (R1) 0.9301; More....

Intraday bias in EUR/CHF remains neutral. While recovery from 0.9208 could extend, upside should be limited below 0.9311 support turned resistance. On the downside, below 0.9236 will bring retest of 0.9208 low first. Decisive break of 0.9204/8 will confirm larger down trend resumption. Next target is 61.8% projection of 0.9660 to 0.9218 from 0.9452 at 0.9179. However, sustained break of 0.9311 will bring stronger rebound back to 0.9452 resistance instead.

In the bigger picture, outlook remains bearish with EUR/CHF staying well inside long term falling channel after multiple rejection by 55 W EMA (now at 0.9385). Firm break of 0.9204 will resume the whole down trend from 1.2004 (2018 high). Next target is 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. Break of 0.9452 resistance is needed to be the first sign of medium term bottoming.

Daily Pivots: (S1) 1.3902; (P) 1.3928; (R1) 1.3969; More...

Intraday bias in USD/CAD remains on the downside for the moment. Fall from 1.4078 should extend to rising channel support (now at 1.3842). Sustained break there will be a sign of bearish reversal. That is, rebound from has completed at 1.4078, and further fall would be seen to 1.3725 support for confirmation. On the upside, though, above 1.3969 minor resistance will turn intraday bias neutral again first.

In the bigger picture, price actions from 1.4791 medium term top is likely just unfolding as a correction to up trend from 1.2005 (2021 low). Based on current momentum, rise from 1.3538 is the second leg, and a third leg should follow before up trend resumption. That is, range trading is set to extend for the medium term. For now, this will remain the favored case as long as 1.3725 support holds. However, firm break of 1.3725 will revive the case that fall from 1.4791 is indeed a larger scale correction.