Gold ran from record to record despite the rising US yields which, in return, rise not only because of the weakening dovishness regarding the Fed rate cut bets, but also because of a general lack of appetite before the upcoming US presidential election. The world is worried that a potential Trump win would further hammer international trade and fan global inflationary pressures. The IMF lowered its global growth forecast for next year to 3.2% due to accelerating risks from wars to protectionism. It however left its 2024 projection unchanged, and expects inflation to slow to 4.3% in 2025 from 5.8% this year.

Over at the Fed, Mary Daly said that she hasn’t seen any information that would suggest that they shouldn’t continue cutting rates but other members including Neel Kashkari say that the rate cuts should continue at a moderate speed. Activity on Fed funds futures assess around 92% chance for a 25bp cut in the November meeting, but there is a mounting speculation that the Fed could make a pause to its nascent loosening policy in December.

As such, the US dollar continues to recover against most majors. The greenback is offered this morning in Asia, but the dollar index rallied more than 4% since the September dip. The EURUSD sold off to 1.0761 yesterday as the rate cut bets in the Eurozone remain strong on the back of inflation that seems under control and weak economic and corporate data.

Many European Central Bank (ECB) members sound increasingly dovish. Olli Rehn for example said that the zone’s ‘dire economy’ may bolster disinflationary pressures, Bank of France’s Francois Villeroy called for more agility with future rate cuts to avoid acting too slowly and Mario Centeno said that the ECB should consider ramping up monetary easing if the data backs such move.

The growing divergence between the Fed and the ECB outlooks should continue to support a deeper selloff in the EURUSD. Price rallies should meet resistance near 1.0870, which shelters the minor 23.6% Fibonacci retracement on September-October selloff and the pair should remain in the bearish trend below 1.0935 – the major 38.2% Fibonacci retracement on that selloff.

Elsewhere, the USDJPY cleared the 150 resistance, pulled out the 200-DMA and is trading past the 152 this morning as the continuation of the rally that started with dovish remarks from the new PM who suggested that the country doesn’t need another rate hike this year. The yen could however need another FX intervention to stop it from falling too fast too low.

In Britain, Cable slipped below the 100-DMA and remains under a selling pressure as the Bank of England (BoE) Governor Bailey says that inflation in Britain is weakening faster than they anticipated, and in Canada, the Loonie hit the lowest levels against the US dollar since the beginning of August after the Bank of Canada (BoC) delivered a 50bp cut yesterday, as expected.

There will certainly be a correction and a consolidation to the US dollar rally, but unlikely before the US election.

In equities, the European stocks remain under pressure. The rising dovish voices at the ECB are favourable but the earnings season is not going well for the European companies. ASML announced weak results, Deutsche Bank warned against rising bad debt due to morose economic environment and announced that it will set aside more money than expected to deal with soaring loans while the European car and luxury good makers are under the pressure of weakening demand at home and in China. Hermes is due to report earnings today and could reveal the slowest quarter in 3 years – a weakness that doesn’t concern business across the Atlantic Ocean.

On the contrary, the US big banks announced a strong quarter, TSM blew past expectations last week hinting that the US chipmakers have likely had a good quarter, Netflix did better than expected and Tesla – which has been struggling lately – came up with better-than-expected results yesterday, after the bell.

The company reported a 8% revenue growth and a 17% jump in net income, said that their costs per vehicle were pulled down to the lowest levels (around $35’100), the operating margin got a boost from 7.6% to 10.8% since last year and Cybertruck reached profitability for the first time. Tesla shares jumped 12% in the afterhours trading. The latter could give a boost to the S&P500 and Nasdaq 100 after a few days of hesitation and retreat.