Today, both economic indicators and speaking events seem to have limited catalysts. In terms of economic indicators, during the London session, we will see French Consumer Confidence for October. During the New York session, we will have the release of Mexico’s Trade Balance for September, U.S. Personal Income and Spending for September, U.S. PCE Deflator for September, and the University of Michigan Consumer Sentiment Index (Final) for October, among others. French indicators and the University of Michigan’s final report are relatively less important. The focus is expected to naturally shift towards U.S. Personal Income, Spending, and the PCE Deflator.
In the preliminary GDP report for the third quarter released yesterday, a strong figure of +4.9% year-on-year was announced, driven by the growth in personal consumption. Prior to the release, U.S. bond yields had risen, and the dollar had been bought. However, after the release, the dollar was sold as profit-taking and position adjustments took place. Nevertheless, it confirmed that the current U.S. economic conditions are favorable.
The PCE Deflator is an important price index for U.S. monetary authorities. Market expectations for the September data to be released today suggest a slight slowdown, with a year-on-year increase of +3.4%, down from the previous +3.5%. The core year-on-year figure is also expected to slow down from +3.9% to +3.7%. In addition, personal income is forecasted to show figures similar to the previous month, with a +0.4% month-on-month change, while personal spending is expected to increase slightly from +0.4% to +0.5%. Market expectations are leaning towards the Federal Open Market Committee (FOMC) keeping interest rates unchanged at its meeting next week, and there don’t seem to be any forecasted figures that would change this view. Unless there are unexpected developments, it seems that the market will remain calm.
Potential sources of turmoil include developments in Israel and their severity, which could impact oil prices and U.S. bond markets. Additionally, it’s important to watch for speculation about foreign exchange interventions by the government and the Bank of Japan, especially during the weekend with thin trading conditions. Market participants are always on edge regarding discussions about Yield Curve Control (YCC) revisions at each meeting, so it’s important to stay vigilant.
The PCE Deflator is an important indicator to consider for future interest rate hikes. We’ll be monitoring the USD’s movement following its release and considering entry if the conditions align.
The USDCHF short position has already been stopped out, as CHF selling exceeded expectations. Current positions are long on BTCUSD and NZDCAD.