• News: UK Retail Sales(MISSED IT – not on calendar)
• Earnings: AXP(American Express) and PG(Proctor & Gamble)

FX Markets:

• UK Retail Sales significantly better than expected(0.3% vs -0.3%). I missed this data release in my analysis yesterday. Atlanta Fed President Bostic (Voting Member) said there is no need to rush rate cuts but also said that he does not see any risk of inflation.
• GBP/USD was trading between 1.2980 – 1.3025 range during the overnight session with it being at the local highs(1.3025) before the UK retail sales at 2:00 AM. Right after the number, it went to 1.3075 which was the upper range before the UK CPI number(1.3025-1.3075). After the number, we saw some reversion back to 1.3025 and then traded between 1.3000 – 1.3065. Yields had priced in 90% chance of 25bp rate in November after the UK CPI but with the Retail number coming significantly better, and BOE’s stance of gradual easing, there is a case for a rate pause in November meeting as well(11/7). And on top of that, with US elections right before the meeting and the rationale of Trump’s inflationary policies leading to higher interest rates for US, USD strengthening trend might continue. I don’t expect it to stay above 1.30 end of next week. BOE Governor Bailey speaks on Tuesday(10/22), would be interesting to see his views on the recent numbers.
• EUR/USD was trading at local highs(1.045) before the US Building permits number at 8:30 which was slightly worse and that most likely caused saw some reprieve for EUR with it going to pre-US retail sales level of 1.0865 and traded in the tight range for 1.0850 and 1.0870 for the remainder of the day. As of now, market has priced in 25bp rate cut for November and December from ECB which on top of consistent positive US growth and inflation data will only put pressure on EUR on the downside. It will most likely will only drift downwards next week as we approach the US elections.
• USD/JPY also saw some reprieve after Atsushi Mimura, Japan’s Vice Finance Minister For International Affairs and top foreign exchange official said that they are closely watching the FX market with some sign of urgency. This statement pushed USD/JPY to drift downwards from 150.00 to 149.5 with the low being 149.35. Unless the BOJ intervened before their scheduled date(10/30), it is only going to drift upwards with USD strengthening further.

US Equity Markets:

• PG beat EPS but missed revenue target owing to less demand from Chinese consumer for premium PG products. AXP as well beat EPS but missed on revenue.
• SPX closed at all time high closing price with Netflix gaining 11% on the back of its earnings after yesterday’s close. Overall, all the sectors were up today. Apple was also up 1.25% owing to better sales for I-phone 16 compared to 15 in China.

Macro View: PG was down 1.5% after the market open but recovered half of it till market close. Overall that also brought down CL(Colgate) but I still like my position. The main reason driving down PG was its China business and that too their premium brands. China accounts for 14% of PG’s revenue and since Colgate doesn’t have China as their main revenue driver, happy to hold it through their earnings(10/25).

I still see dollar strengthening to continue across pairs as we move closer to the election. The odds for a 25bp rate next Fed meeting meeting(11/7) are slightly up from yesterday to 93% but I still see more than 7% chance of no rate hike. We have 4 more important jobs and inflation numbers before the meeting PMI(10/24), GDP(10/30), PCE(10/31) and NFP(11/1) and they will drive the decision for Fed. I also think the BOJ intervention might also impact their decision making to not cause further panic if BOJ intervened or does drastic rate hikes.

News: None

Sources: Marketwatch(https://www.marketwatch.com/), Reuters(https://www.reuters.com/), finviz(https://finviz.com/)