US Dollar Under Pressure Following Data Miss As Traders Mull Fed-Pivot (Again!)

The US Dollar has turned firmly lower into the middle of the week on the back of weaker-
than-expected consumer confidence data yesterday which has revived debate around a
potential Fed pivot. The WSJ ran a piece late last week discussing the potential for a Fed
pivot from December and recent USD price action suggests that traders are buying into this
notion. We’ve seen US yields coming off this week as traders mull the idea that the fed
might signal a slower pace of tightening following November’s projected 75bps hike.
Tomorrow’s US advance GDP reading will be the next key data to watch as we head through
the week.

Key Factors for Today

- USD falls following weak consumer confidence data & growing Fed-pivot discussion
- Equities rally continues as USD and bond yields drop
- AUD leads in FX following CPI data, safe-havens trailing
- BOC in focus today – rate hike expectations split
- Metals and oil rally as USD falls

Coming Up

- USD US goods trade balance
- Oil EIA crude inventories
- CAD BOC Rate decision

Equities Rallying As USD Drops

Equities are continuing to push higher into the middle of the week on Wednesday. A weaker
US Dollar is helping lift sentiment in stocks, along with the slide in bond yields globally which
is creating a better risk backdrop. If USD continues to weaken through the remainder of the
week, stocks look poised to continue their rally. However, it’s important to keep an eye on
US earnings season. Yesterday saw some key names (Microsoft and Alphabet)
undershooting forecasts, raising speculation that Apple might be in for a bumpy ride when it
reports tomorrow.

Google Misses Earnings Forecasts

Alphabet (Google) saw a dismal set of Q3 results yesterday with the company posting EPS of
$1.06 vs $1.26 expected on revenues of $69 billion vs $71 billion expected. The group
blamed an unexpected decline in its core search ad business as the main driver behind the
underperformance. Alphabet also noted that it was struggling against competition from the
likes of TikTok.

AUD Leads Following CPI Data

In FX, the fall back in USD has opened the way for a reversal of recent themes. AUD has
swung into the lead as the strongest performer over late Asian and early European trading
on Wednesday. Overnight, Aussie CPI was seen rising again over the last quarter to 1.8%
from 1.6% prior. With Aussie CPI at a far more tolerable level than other major economies
and the RBA having already slowed on tightening, traders are looking at AUD as a more
stable bet.

Rate Hike Expectations Split Ahead of BOC

CAD will be in focus today as the BOC meets for its October rates meeting. The bank is
widely expected to push ahead with further tightening though expectations are split over
whether the bank will go for a larger 75bps hike or a smaller 25bps hike, leaving plenty of
two-way risk in the market today.

Metals & Oil Rally on USD Weakness

In the metals and commodities space, both gold and silver are turning lower off recent lows
as a softer USD paves the way for a reversal higher. If USD stays pressured throughout the
rest of the week, metals have room to rebound further here. Crude prices have also turned
higher into the middle of the week, benefiting from the selloff in the US Dollar. Traders now
await the latest EIA release later today, expected to show a further drawdown in US crude
stores, which should drive oil higher still.