Central Banks and Interest Rates - Central banks in Australia, Sweden, and Brazil are expected to maintain current interest rates, while Mexico may implement a rate cut [1] - The Bank of England (BOE) is likely to hold rates at 4% due to inflation being nearly double its 2% target, with a potential cut not expected until a clear downtrend in inflation is observed, likely by April [2][4] - The BOE's decision to pause rate cuts would end a pattern of reducing rates at every other meeting since August 2024, contrasting with the US Federal Reserve's recent policy loosening [3][5] Economic Data and Forecasts - Recent softer-than-expected economic data has increased uncertainty regarding the BOE's upcoming meeting, with a hold being more likely than a cut [2] - The US Federal Reserve is cautious about further cuts, with upcoming speeches from Fed officials expected to provide insights into the economy and job market amid delayed official data releases due to a government shutdown [6][7] - Private-sector reports are anticipated to show modest increases in employment, with ADP Research projecting a rise in October private employment after previous declines [8] Regional Economic Insights - In Canada, Prime Minister Mark Carney's upcoming budget is expected to cut operating spending while investing in capital projects, with a projected deficit of at least C$70 billion ($50 billion) [10] - Economists predict continued softness in Canadian job data, following a net loss of 45,900 positions in the third quarter [11] - In Asia, factory activity releases will provide insights into the region's manufacturing amid global trade strains, with key data from China, India, South Korea, Taiwan, and Japan being closely monitored [12] Central Bank Meetings and Decisions - Sweden's Riksbank is expected to keep its rate at a three-year low of 1.75%, while the European Central Bank and other regional banks are also anticipated to maintain current rates [18][20] - The Turkish central bank faces challenges with inflation remaining above 2% in October, while Madagascar may lower its key interest rate as inflation slows [23][24] - In Latin America, Brazil's central bank is expected to hold rates at 15%, while Mexico's Banxico is likely to implement a rate cut to 7.25% amid improving inflation conditions [25][29]

Group 1 - The Japanese yen declined against the U.S. dollar after the Bank of Japan maintained interest rates and signaled a potential rate hike depending on wage outlook [1][2] - The Federal Reserve Chair Jerome Powell indicated that a rate cut in December is not guaranteed, contributing to the dollar's strength [1][3] - Fed funds futures traders adjusted their expectations, now pricing in 71% odds of a rate cut in December, down from 85% prior to Powell's comments [5] Group 2 - The Bank of Japan's decision to keep rates steady disappointed yen bulls, as there was little indication of a timeline for future rate hikes [2] - The dollar index increased by 0.35% to 99.49, reaching its highest level since August 1, while the dollar strengthened 0.98% against the yen to 154.21, the highest since February 13 [5] - The European Central Bank also kept interest rates unchanged at 2% for the third consecutive meeting, with no hints about future moves, leading to a decline in the euro [6]

Core Viewpoint - The Reserve Bank of India (RBI) is expected to resume bond purchases early next year to address emerging liquidity strains among lenders, with potential purchases estimated at around ₹1 lakh crore ($11.3 billion) in the January-March quarter [1][5]. Group 1: Liquidity Situation - Lenders are experiencing a cash shortage following the RBI's intervention to support the rupee, which has been one of Asia's worst-performing currencies this year [2][3]. - As of October 27, there was a ₹11,360-crore deficit in banking liquidity, a significant drop from a surplus of approximately ₹4 lakh crore in August, influenced by tax outflows and increased cash demand during festivals [3][4]. Group 2: RBI's Actions - The RBI has recently increased short-term cash injections and conducted foreign-exchange swaps to replenish liquidity after its currency-support measures drained cash from the system [4][5]. - The last bond purchase by the RBI occurred in May, totaling ₹5.2 lakh crore over five months leading up to that date [4]. Group 3: Future Outlook - Analysts anticipate that the RBI will return to bond purchases as a primary tool for ensuring durable liquidity, which would also support the bond market [6]. - The need for liquidity injections may decrease if a US-India trade deal enhances foreign inflows, although the RBI has maintained interest rates for now while indicating potential future easing [5][6].

Core Viewpoint - The Swiss National Bank has decided to maintain its interest rate at 0%, indicating that the current economic outlook and future inflation do not necessitate a shift into negative interest rates [1] Economic Outlook - The decision reflects the Swiss economic outlook, which suggests stability and no immediate need for further monetary easing [1] Inflation Considerations - Future inflation expectations played a significant role in the decision, as the bank assessed that inflation levels do not warrant a reduction in interest rates [1]

Economic Outlook - The trade tensions between the United States and China pose a significant risk to Thailand's economic growth, with the central bank's deputy governor indicating limited room for further rate cuts [1][2] - The Bank of Thailand expects growth rates of 2.2% for the current year and 1.8% in 2026, which are below the potential growth rate of 2.7% [3] Monetary Policy - Despite sluggish economic growth, the central bank decided to maintain the key interest rate at 1.5%, which is historically low, rather than implementing cuts [4] - The deputy governor noted that lending rates have only dipped below 1.5% three times in history, during significant crises [4] Economic Constraints - The central bank is focusing on financial measures, such as debt restructuring and loan guarantee schemes, rather than solely relying on funding conditions to stimulate the economy [5] - Recent negative inflation data for six consecutive months does not necessitate a change in the central bank's inflation target of 1-3%, as declines are attributed to external factors [6]

Economic Data and Government Impact - The Bureau of Labor Statistics (BLS) is recalling staff to ensure the release of the September Consumer Price Index (CPI) report despite a government shutdown, highlighting the critical importance of inflation data for market and policy decisions [3][8] - The Labor Department's Office of the Inspector General has initiated an inquiry into the BLS's methods for collecting and publishing key economic data, including CPI and Producer Price Index (PPI) [3] Federal Reserve Leadership Update - Former Federal Reserve Governor Larry Lindsey has withdrawn his name from consideration for the position of US Federal Reserve Chair, narrowing the field for this crucial leadership role [4][8] Global Currency Fluctuations - The Japanese Yen has weakened to its lowest point against the US dollar since mid-February, while the Euro has also experienced a decline, influenced by political developments and monetary policy expectations [5][8] Corporate Earnings and Industry News - Levi Strauss & Co. (LEVI) anticipates a 70 basis point impact to its annual gross margin from tariffs, an increase from a previous estimate of 50 basis points, although 70% of its US holiday inventory is secured [9][8] - In the automotive sector, Toyota (TM) has updated its bZ4X electric vehicle (EV) to boast the longest range among domestic EVs in Japan, indicating the company's ongoing efforts in the competitive EV market [9] Healthcare Policy Developments - Discussions are ongoing between US pharmacies and drug discounters, including GoodRx Holdings Inc. (GDRX), regarding their potential role in the TrumpRx initiative, which aims to provide consumers with access to discounted prescription medications [10] New Zealand Manufacturing Data - The New Zealand BusinessNZ Manufacturing PMI for September remained unchanged at 49.9, indicating a continued contraction in the manufacturing sector, as a reading below 50.0 signifies a decline in manufacturing activity [11]

Market Response to Government Shutdown - The equity markets reached all-time highs despite the government shutdown, indicating a historical trend where shutdowns have not significantly impacted market performance [2][3][4] - The excitement surrounding AI technology, particularly in the semiconductor sector, has contributed to market strength [3] - Treasury yields decreased slightly, influenced by weak ADP job data and expectations of continued Federal Reserve rate cuts [5][6] Economic Implications - The government shutdown is expected to have a non-linear impact on the economy, with a general rule of thumb suggesting a 0.1% decrease in GDP for each week of the shutdown [19] - If the shutdown extends beyond October 17th, the unemployment rate could rise to 4.8%, but this is anticipated to be a temporary spike [19] - Businesses are likely to exercise caution and avoid significant risks during periods of uncertainty, which could lead to permanent losses in the economy [20][21] Data Dependency and Future Outlook - The lack of government data makes alternative data sources more critical for economic analysis, as traditional metrics may not be available [14][15] - The Federal Reserve's decisions will be heavily influenced by the available data, with a focus on labor market indicators [6][27] - The key number to watch for maintaining stable unemployment is 40,000 jobs created per month, which is essential for economic stability [29][30]

Market Overview - The stock market continues to reach new highs, but is currently overbought, indicating susceptibility to a pullback [10] - Money flows in early trade show positive trends for Microsoft Corp (MSFT), neutral for Apple Inc (AAPL), Amazon.com, Inc. (AMZN), and Alphabet Inc Class C (GOOG), while negative for Meta Platforms Inc (META), Nvidia (NVDA), and Tesla Inc (TSLA) [7][8] Economic Indicators - Housing starts came in at 1.307 million, below the consensus of 1.375 million, while building permits were at 1.312 million versus a consensus of 1.370 million [10] - Consumer Price Index (CPI) showed a month-over-month increase of 0.1%, below the expected 0.2%, and a year-over-year increase of 2.0%, slightly below the 2.1% consensus [10] China-U.S. Relations - China is increasing pressure on the U.S. by using semiconductors as leverage, with a ban on Chinese companies purchasing NVIDIA chips [6][10] - The ban is perceived as a move to reduce reliance on U.S. technology, raising questions about investor sentiment regarding the narrative of it being a negotiating tactic [10] Federal Reserve Outlook - The Federal Open Market Committee (FOMC) rate decision is anticipated, with a consensus expectation of a 25 basis points cut, though a 50 basis points cut is also a possibility due to political pressure [10] - The market reaction to the Fed's decision could lead to either a 'melt up' or a 'sell the news' scenario, with differing narratives among investors [10] Commodity Market - API crude inventories reported a draw of 3.42 million barrels, exceeding the consensus draw of 1.6 million barrels [11]

Core Viewpoint - Deutsche Bank has raised its gold price forecast for next year to an average of $4,000 per ounce, citing strong central bank demand, potential U.S. dollar weakness, and a resumed Federal Reserve rate-easing cycle [1]. Group 1: Gold Price Forecast - The forecast was increased from a previous expectation of $3,700 per ounce, reflecting downside risks to the Federal Reserve's base case of holding rates steady in 2026 after three anticipated rate cuts in 2025 [1][3]. - Official gold demand is continuing at twice the pace of the 2011-2021 average, primarily driven by China [3]. - The price of gold has risen about 40% year-to-date and reached a record high of $3,702.95 [4]. Group 2: Factors Influencing Gold Prices - Strong central bank demand and potential U.S. dollar weakness are key factors supporting the increased gold price forecast [1]. - Uncertainty from changes in the Federal Open Market Committee's composition and challenges to Fed independence are also seen as supportive for gold prices [2]. - The supply of recycled gold is running 4% below expected levels this year, easing limits on gold's upside [3]. Group 3: Silver Price Forecast - Deutsche Bank has raised its silver price forecast for 2026 to an average of $45 per ounce, up from $40 [4].

Core Insights - The average rate on a 30-year U.S. mortgage has decreased to 6.35%, the lowest level in nearly a year, influenced by a pullback in Treasury yields and expectations of an interest rate cut from the Federal Reserve [2][4] - The housing market has been sluggish since 2022, with mortgage rates previously climbing from historic lows, but the recent decline in rates has led to a surge in mortgage applications, reaching a three-year high [2][4] Mortgage Rates - The average rate for 15-year fixed-rate mortgages fell to 5.5% from 5.6% last week, compared to 5.27% a year ago [2] - The yield on 10-year Treasuries was at 4% on Thursday afternoon, which lenders use as a guide for pricing home loans [2] Federal Reserve Influence - The Federal Reserve has maintained its main interest rate this year, focusing on inflation concerns rather than the job market [2] - Recent job market data, including a report of only 22,000 jobs added in August, has fueled speculation about potential rate cuts by the Fed [2] Market Dynamics - The recent decline in mortgage rates has encouraged prospective homebuyers and homeowners looking to refinance, with refinancing applications making up nearly 50% of all mortgage applications last week [4] - If mortgage rates continue to decrease, it could lead to increased competition in the housing market, as more buyers enter the market [4]