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Different market segments to some extent again focused on different markets themes/drivers. Core yields showed tentative signs of bottoming yesterday, after a protracted decline throughout most of this month. A jump in oil prices (Brent $65.75 p/b currently compared to low $60 p/b early this week) after the US announced sanctions against the two largest Russian Oil companies made investors’ pondering recent gradual easing in inflation expectations. Uncertainty ahead of today’s US CPI release probably also injected some caution. US yields yesterday rebounded between 4.5 bps and 5.6 bps with the belly of the curve slightly underperforming. The US 10-y yield is testing the 4% barrier. European yields followed at a distance with German yields rising about 2 bps across the curve. The rise in oil prices/higher yields hardly had any (negative) impact on equity markets. Equity investors apparently focused on a potential easing of trade tensions between the US and China as US president Trump and Chinese President Xi Jinping will meet next week. US indices added between 0.31% (Dow) and 0.89% (Nasdaq). No clear tend in for USD trading yet. EUR/USD closed marginally higher at 1.1618. The yen still underperforms (USD/JPY close at 152.6). EUR/GBP closed north of 0.87 as markets are still considering the timing of further BoE easing after this week’s better/less worse than expected UK inflation data.

Eco data for once might capture the market focus today with the EMU and US September PMI’s and the (delayed) US September CPI. The EMU composite PMI is expected to confirm sluggish growth at the start of Q4 (51.1). Even as the ECB is in a firm wait-and-see modus, markets recently were not convinced on the EU eco momentum, raising the implied probability of an additional rate cut next year to >50%. EMU yields and EUR/USD still might be a bit more sensitive to negative news rather than to in line/slightly better data. In the US, September headline CPI is expected to accelerate to 0.4% M/M and 3.1% Y/Y (from 2.9%). Core inflation is seen unchanged from August at 0.3% M/M and 3.1% Y/Y. Such data would only confirm rather stubborn inflation since April. Even so, with the Fed focus shifting to labour market softness rather than inflation, it’s unlikely the report will profoundly change expectations on the Fed further reducing policy tightening by 25 bps next week and in December, bringing it closer to neutral. Given the Fed focus on the labour market/economic activity, the US PMI’s (composite expected at 53.5 from 53.9) and, to a lesser extent, (final) Michigan consumer confidence also deserve attention. Overall, we see a slightly higher chance for US yields to take a breather after recent decline. It’s probably too early to step up expectations on the pace of further Fed easing next year. EMU yields might be a bit more vulnerable in case of negative news. In this context, the dollar might have slightly better cards compared to the euro. The 1.1542/43 area marks first intermediate support. In the UK, consumer confidence and especially September retail sales were much stronger than expected. In a first reaction, EUR/GBP is ceding some ground but for new still holds north of 0.87.

News & Views

Japanese headline inflation accelerated to 2.9% from 2.7% in September. The gauge excluding fresh food (preferred by the Bank of Japan) was a copy paste while the series without both fresh food and energy eased to 3% from 3.3%. Services CPI slowed to 1.4% from 1.5%. The waiver of child fees in Tokyo and slower gains in dining out on a drop in (still-elevated) rice prices are among the reasons cited. Other labor-intensive services showed quicker price rises. The umpteenth above-target (3%) reading is unlikely to result in a rate hike next week as reports suggested the BOJ sees no urgency to do so just yet. It may first need a clearer view on domestic policies by the freshly announced PM Takaichi. Japanese data also included the October PMIs. They all eased from last month with the composite signaling the slowest growth since May (50.9). Services momentum is dwindling (52.4 from 53.3) and manufacturing remains stuck in decline. The latter has become more upbeat on the year ahead though. Price indicators continue to point at strong inflationary pressures. JPY loses ground this morning with USD/JPY pushing towards 153.

US president Trump said he’ll terminate all trade negotiations with Canada. That announcement came after he having seen a Canadian advertisement in which former Republican president Reagan hailed the benefits of free trade and slammed tariffs. Trump said the move appears timed to interfere with the Supreme Court case that’s looking in the legality of his Liberation Day levies. It’s scheduled to hear oral arguments on November 5. It’s not the first time Trump has threatened to call off trade talks but the Loonie nevertheless is feeling selling pressures. USD/CAD this morning rises above 1.40.

UK retail activity surprised to the upside in September, with sales volumes rising 0.5% mom, defying expectations of a -0.2% mom decline. The gain marked the fourth consecutive monthly increase, lifting total sales to their highest level since July 2022. Stronger non-store and clothing sales helped offset weakness in fuel and other discretionary categories.

Over the third quarter, retail volumes grew 0.9% compared with the previous quarter, confirming a steady rebound in household demand through the summer. The good weather in July and August was cited as a key driver, boosting clothing sales and supporting outdoor-related spending. Online and non-store retailers also enjoyed sustained gains.

Full UK retail sales release here.

Trade tensions between the US and China eased — after flaring up, easing and flaring up again over recent weeks — on news that Trump and Xi will meet next Thursday at a summit in Asia. Optimism, however, is fragile after Trump said trade talks with Canada were terminated due to an ad opposing US tariffs that targeted Republican-held districts and used Ronald Reagan’s words. There’s no guarantee the US-China meeting will happen or lead to a durable truce — I’m extremely skeptical — but it would mark the first face-to-face encounter since Trump returned to the White House and follow a wild ride of tariff and chip wars that have only intensified since January.

Make no mistake: Xi knows that America won’t be an ideal partner for China, with or without Trump in the White House. Relations may have been less chaotic before, but the first chip export restrictions actually came during the Biden administration — and China remains determined to gain tech independence from the West. And it’s doing well. The country now has its own tech giants, social media platforms, communication systems, EVs, smartphones, robots and chips. Beijing wants those tech leaders to use homegrown components to keep production in-house. Many domestic chipmakers are thriving. SMIC shares, for instance, have soared nearly 500% since last September Alibaba has climbed up to 140% since DeepSeek’s chatbot launch early this, and the Hang Seng Index has recovered roughly two-thirds of its post-2018 selloff. With limited foreign investor exposure and Beijing’s clear push to make the sector shine, Chinese tech could still have room to run.

Returning to the trade story — the Trump-Xi meeting next Thursday could keep hope, and the bears, at bay for now.

Meanwhile, the prospect of robust tech earnings and lower Fed rates continues to sweeten investor sentiment. Earnings from Netflix, Tesla, IBM, Super Micro Computer and SAP came in mixed, but markets are now in wait-and-see mode ahead of next week, when the AI heavyweights are expected to deliver standout results and the Federal Reserve (Fed) a 25bp cut.

Finally some data! Economic data remains scarce due to the ongoing US government shutdown, but the Bureau of Labor Statistics decided to publish September CPI figures today to give policymakers and investors some direction ahead of next week’s decision. Both headline and core inflation are expected to land around 3.1% YoY for September, and some analysts warn CPI could rise toward 3.5% in the coming months amid tariff-driven pressures. That’s well above the Fed’s 2% target, but markets broadly believe the central bank will tolerate higher inflation to avoid an economic meltdown.

Even so, inflation remains an issue. Today’s numbers are unlikely to be a game-changer if they align with the 3% expectation. A softer print could fuel speculation of a third rate cut in December, boosting risk appetite while dragging US yields and the dollar lower. Conversely, a stronger CPI could trigger a reassessment of dovish expectations and raise questions about whether major indices deserve to keep pushing into uncharted highs.

Despite risks, global equities continue to rally. The S&P 500 and Nasdaq keep hitting records — largely on AI enthusiasm — while the Dow Jones, Stoxx 600, and even the FTSE 100 are near all-time highs. Indices, of course, don’t always reflect underlying fundamentals, but in a high-inflation environment, equities remain one of the few ways to keep pace with price pressures. For now, despite bubbling bubble concerns, consensus still points to an extension of the global rally — unless US inflation data challenge that view before the weekly close. In the absence of a big deviation, focus will remain squarely on the Fed and earnings.

In FX, the US dollar held firm this week — stronger than expected given the extended government shutdown — as political headlines elsewhere offset dollar weakness. French political turmoil kept the euro under pressure, while Takaichi’s appointment as Japan’s new prime minister push the USDJPY higher on expectations of a softer Bank of Japan (BoJ) stance.

In metals and energy, gold is consolidating just above $4,100 per ounce, suggesting the early-week selling pressure has eased alongside volatility. US crude tested but failed to sustain gains above its 50-day moving average near $62.50/bbl after new sanctions targeting two Russian oil giants triggered conflicting reports on whether India might halt Russian oil imports to avoid secondary sanctions. From a technical standpoint, recent headlines have likely exhausted their upside potential, leaving room for a minor correction into the weekly closing bell.

In focus today

The delayed US September CPI is set to be released at 14:30 CET. We forecast headline CPI at 3.1% y/y from 2.9% and core CPI inflation at 3.1% y/y from 3.1%. We see risks skewed towards a higher reading but think the bar for the Fed skipping its planned rate cut on 29 October is very high. After the CPI, October flash PMIs will be released for the US. Private-sector data could gather more attention than usual considering the government shutdown.

In the euro area, the important October flash PMI report is released. Following stronger-than-expected growth in the first half of the year we expect the euro area economy to be close to stagnant in the second half of 2025 with 0.1% q/q GDP growth in both quarters, driven by 'front-loading' of exports at the start of the year.

The Swedish PPI figures are unlikely to have any instant market impact. However, some subindices may offer useful insights into future inflation pressures and therefore can be of value for inflation forecasts.

Economic and market news

What happened overnight

In the trade war, US President Trump abruptly ended trade negotiations with Canada over an anti-tariff ad campaign launched by the province of Ontario. In a post on Truth Social, Trump declared, "All trade negotiations with Canada are hereby terminated".

The White House confirmed that US President Trump will meet Chinese President Xi Jinping on Thursday next week. Whether it would come to pass has previously been drawn into question following the recent escalation of trade tensions.

In Japan, CPI inflation (excl. fresh food) increased to 2.9% in September from 2.7% in August. It marks the 42nd consecutive month with Bank of Japan's (BoJ) favourite inflation measure above the 2% target. Even so, we expect the BoJ will keep its policy rate on hold at 0.5% at its meeting next week. Core inflation declined to 1.3% from 1.6%, reflecting that inflation is still not a demand driven phenomenon in Japan. According to PMIs, the economy decelerated in October, with composite PMI declining to 50.9 from 51.3, driven mostly by service expansion becoming less dominant. We expect the BoJ will find room for the next rate hike in December.

What happened yesterday

In the euro area, October consumer confidence surprisingly improved to -14.2 (cons:

-15.0) from -14.9 however, the measure remained at a very low level, broadly like the past five months. The weak confidence is dampening consumption growth despite solid fundamentals such as rising employment, lower rates and rising real incomes.

In Denmark, consumer confidence declined to its lowest level since early 2023 to -19.5 from -18.7 in September. Inflation concerns remain high, driven predominantly by elevated food prices, although the perception of price developments showed a slight improvement.

In Norway, wage growth slowed to 4.3% y/y in September, down from 4.5% y/y in August. Slower wage growth is a necessary condition for Norges Bank to cut rates next year, so this is a move in the right direction even if the level still is too high. At the same time, the preliminary employment figure rose 0.1 % m/m in September, hence employment growth seems to be slowing, but only marginally weaker than Norges Bank's assumption from the September MPR and should be neutral to the monetary policy outlook. The trend-adjusted LFS unemployment rate was unchanged at 4.7% in September.

In China, a new outline of the Five-Year Plan for 2026-2030 was revealed and came with a few surprises but underlined the goal of becoming a tech superpower with a high degree of self-reliance. Boosting private consumption was again highlighted as a priority. However, on this point the language was a bit disappointing given the weak achievements on this goal in recent years. We may get more details in March when the full plan is revealed.

Equities: Equities rallied broadly yesterday in what looked like a textbook-style risk-on session. Investors turned notably more optimistic, not only on macro fundamentals, but rather on political and geopolitical developments, and to be fair, helped by some spectacular earnings releases. The result was a clear pro-cyclical rotation: cyclicals outperformed defensives, implied volatility declined, and small caps beat large caps. Add to this, the long end of the curve finally traded higher. Meanwhile, oil surged more than 5%, lifting the energy sector, though several non-energy sectors in the US still outperformed, a telling signal of how little the current oil price level worries markets. Even with such a sharp daily move, the broader equity complex remained firm. On the political side, the US and China announced a new round of trade talks, and more importantly, Trump and Xi are set to meet in Korea next week. In the US yesterday, Dow +0.3%, S&P 500 +0.6%, Nasdaq +0.9%, Russell 2000 +1.3%. Asian markets are higher this morning, led once again by tech. The KOSPI index, for example, is now up more than 70% year-to-date (!). Futures in both Europe and the US are pointing slightly higher as well.

FI and FX: Risk sentiment improved after the White House confirmed that President Trump will meet with Chinese President Xi Jinping next Thursday. US Treasury yields rose around 5bp across the curve, with the 10-year yield back near 4.00%. In the euro area, yields also moved higher, albeit more modestly, with Bund yields up roughly 2bp across the curve. EUR/USD continues to trade around 1.16, with the USD firmer across the G10. The news that Sweden intends to sell 100-150 JAS 39 Gripen E to Ukraine had a minor instantaneous and short-lived negative effect on EUR/SEK. The Norwegian krone has seen significant fluctuations in recent weeks, but nothing has occurred to alter our long-term view.

Daily Pivots: (S1) 1.1595; (P) 1.1608; (R1) 1.1630; More…

Intraday bias in EUR/USD remains neutral, and further decline is expected with 1.1727 resistance intact. Break of 1.1540 will resume the fall from 1.1917 to 1.1390 support, or even further to 38.2% retracement of 1.0176 to 1.1917 at 1.1252. On the upside, though, break of 1.1727 resistance will turn bias back to the upside for 1.1778, and then retest of 1.1917 high instead.

In the bigger picture, considering bearish divergence condition in D MACD, a medium term top is likely in place at 1.1917, just ahead of 1.2 key psychological level. As long as 55 W EMA (now at 1.1290) holds, the up trend from 0.9534 (2022 low) is still expected to continue. Decisive break of 1.2000 will carry larger bullish implications. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep outlook bearish.

Daily Pivots: (S1) 152.01; (P) 152.40; (R1) 152.99; More...

Intraday bias in USD/JPY stays on the upside at this point. Break of 153.26 will larger rally from 139.87 to 100% projection of 142.66 to 150.90 from 145.47 at 153.71. Firm break there would prompt upside acceleration to 161.8% projection at 158.80. On the downside, below 152.46 minor support will turn intraday bias neutral again first.

In the bigger picture, current development suggests that corrective pattern from 161.94 (2024 high) has completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94 high. On the downside, break of 145.47 support will dampen this bullish view and extend the corrective pattern with another falling leg.

Daily Pivots: (S1) 1.3301; (P) 1.3333; (R1) 1.3358; More...

No change in GBP/USD's outlook and intraday bias stays neutral. Fall from 1.3725 could extend lower and break of 1.3247 will target 1.3140 cluster (38.2% retracement of 1.2099 to 1.3787 at 1.3142). Strong support is expected there to contain downside to complete the corrective pattern from 1.3787. On the upside, break of 1.3170 resistance will turn bias back to the upside for 1.3526 resistance. Firm break there will target 1.3725/87 resistance zone.

In the bigger picture, rise from 1.0351 (2022 low) is still seen as a corrective move. Further rally could be seen to 61.8% projection of 1.0351 to 1.3433 (2024 high) from 1.2099 (2025 low) at 1.4004. But strong resistance could emerge from 1.4248 (2021 high) to limit upside. Sustained break of 55 W EMA (now at 1.3191) will argue that a medium term top has already formed and bring deeper fall back to 1.2099.

Daily Pivots: (S1) 0.7939; (P) 0.7963; (R1) 0.7976; More…

No change in USD/CHF's outlook and intraday bias remains neutral. With 0.7984 resistance intact, further decline is in favor. On the downside, below 0.7913 minor support will turn bias to the downside for 0.7872 and then 0.7828 low. Firm break there will resume larger down trend. However, break of 0.7984 will suggest that corrective pattern from 0.7828 is extending with another rising leg, and target 0.8075 again.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).

Daily Pivots: (S1) 0.6489; (P) 0.6503; (R1) 0.6528; More...

No change in AUD/USD's outlook as consolidations continues. Intraday bias remains neutral at this point. Further decline is in favor as long as 55 D EMA (now at 0.6539) holds. Below 0.6439 will target 0.6413 cluster support (38.2% retracement of 0.5913 to 0.6706 at 0.6403. Decisive break there will indicate bearish reversal after rejection by 0.6713 fibonacci level. Nevertheless, sustained trading above 55 D EMA will keep the rise from 0.5913 intact, and bring retest of 0.6706 high.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. Outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, sustained break of 0.6713 will be a strong sign of bullish trend reversal, and pave the way to 0.6941 structural resistance for confirmation.

Daily Pivots: (S1) 1.3981; (P) 1.3993; (R1) 1.4006; More...

USD/CAD is still extending the corrective pattern from 1.4078. Intraday bias stays neutral for the moment. While deeper retreat cannot be ruled out, further rally is still expected as long as 1.3930 support holds. Current development suggest that rise from 1.3538 is reversing whole fall from 1.4791. Above 1.4078 will target 61.8% retracement of 1.4791 to 1.3538 at 1.4312.

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.