The S&P500 gained 0.21% while Nasdaq 100 rebounded 0.83%. Tesla jumped almost 22% - its best session in 11 years. The DAX advanced 0.34% and the Stoxx 600 index closed near flat. Even Kering’s shares – the troubled company that owns Gucci – saw its shares jump 1.42% yesterday despite the fact that the company warned that its profit this year will fall to the lowest levels since 2016 due to the weak Chinese demand. Elsewhere, the Korean SK Hynix released satisfactory results for its investors and added to the optimism that the AI demand remains robust and Roundhill’s Magnificent 7 ETF gained more than 3%.

Overall, the earnings season is going well in the US, less well in Europe. The latter also matches the macroeconomic news where data is strong in the US, and much less in Europe. In this context, yesterday’s PMI figures showed that contraction in mainland Europe continued, even though the deterioration in Germany was less severe than expected in October, while France saw its manufacturing and services sector contract faster.

The latest PMI numbers, combined with weakness in earnings and dovish remarks from the European Central Bank (ECB) members, brought some investors to start betting that the ECB would accelerate the size of its rate cuts in the foreseeable future. There is now a small but a rising possibility of a 50bp cut from the ECB in its December meeting. And the EZ’s below 2% headline inflation could convince many ECB members that it’s time to take a risk.

As such, the euro should remain under pressure. The EURUSD rebounded yesterday on the back of a broad-based US dollar weakness that, by the way, came to play despite stronger-than-expected housing and PMI data, and softer-than-expected jobless claims hinting that the dollar’s move yesterday was certainly a consolidation and correction and isn’t backed by fundamentals.

The divergence between the euro and US dollar outlook, the view that Trump’s potential return to the US White House could worsen the trade relations between the two continents and the sustained gap between the German and French 10-year yields (due to worries about France’s ability to strengthen its finances amid political turmoil) remain supportive of a further decline in the EURUSD. The pair should see resistance into 1.0870, the minor 23.6% Fibonacci retracement on the latest selloff. Key resistance to the actual bearish trend sits at 1.0935 – the major 38.2% Fibonacci retracement.

The single currency is however better bid against the British pound that’s also under pressure these days, as the Bank of England (BoE) Governor Bailey sounds unusually dovish regarding the policy of his bank, and overly confident that inflation will be slowing faster than the policymakers once thought.

As such, Cable will likely close the week below the 1.30 mark, very close to the major 38.2% Fibonacci retracement on April to September rally, and walk into next week’s Budget in the bearish consolidation zone. As per the budget, there will certainly be difficult-to-digest announcements for UK companies and wealthy individuals next week. And the tighter the budget, the more supportive the BoE should be... if inflation allows.

In Japan, the yen is better bid but the USDJPY consolidates gains above the 150 level and the risks remain tilted to the upside into the election weekend, which could see the country’s ruling party lose its majority in the lower parliament for the first time since 2009. The latter would be bad for both the yen and the Japanese stocks. Moreover, the Bank of Japan (BoJ) Governor Ueda aligned with the expectations that the bank would not hike rates at its next week’s policy meeting. Therefore, the yen risks remain tilted to the downside, dipbuyers in the USDJPY are waiting in ambush near the 150 level and a direct FX intervention may not be on the menu before the 160s range.  

Finally in energy, US crude made an attempt to clear the 50-DMA – a touch lower than the $72pb level – yesterday but the 5.5-mio barrel build in US inventories last week capped the upside potential near this important technical level. While oil bulls may not be in peak form lately, risks tend to lean to the upside heading into weekends due to the potential for an escalation in the Middle East conflict. Therefore, selling oil below the $70pb level doesn’t look safe.