Economy

TOKYO (Reuters) – The U.S. dollar traded near a two-month peak against major peers on Thursday as markets grew more confident about a patient approach from the Federal Reserve to further monetary easing, even as a key inflation report loomed later in the day.The dollar index, which measures the currency against six key rivals, was steady after climbing to the highest since Aug. 16 overnight, as traders further pared bets for U.S. interest rate cuts this year in the wake of last week’s unexpectedly strong payrolls data.September’s consumer price index (CPI), due at 1230 GMT, is likely to show core inflation holding steady at a 3.2% year-on-year clip, according to economists polled by Reuters.The euro languished near its lowest since Aug. 13, while against the yen, the dollar hovered close to its strongest level since Aug. 15.The “U.S. exceptionalism trade” has reignited on the back of the spate of strong jobs data recently, said Kyle Rodda, senior financial markets analyst at Capital.com, with minutes from the Fed’s latest meeting – released overnight – confirming the central bank’s focus on keeping the labour market healthy.”The U.S. dollar is regaining supremacy, … mostly because of continued U.S. economic outperformance”, Rodda said.At the same time, “an upside surprise in U.S. CPI could force the Fed to doubt its confidence about the path for inflation.”San Francisco Fed President Mary Daly said late Wednesday that she was less concerned now about resurgent inflation than about hurting the labor market.Traders lay 80% odds on the Fed cutting rates by a quarter point at its next policy decision on Nov. 7, versus 20% probability of no change, according to the CME Group’s (NASDAQ:CME) FedWatch Tool. A day earlier, the probability of a cut stood at 85%.The dollar index was little changed at 102.86 as of 0024 GMT, sticking close to Wednesday’s high of 102.93.The greenback eased 0.18% to 149.035 yen, but was not far from the overnight peak of 146.365.The euro was flat at $1.0939 following its dip to $1.0936 in the previous session.Australia’s dollar (AUD=D3 > slipped 0.07% to $0.6714, edging back towards its low of $0.6708 from Wednesday, the weakest level since Sept. 16, after a stimulus announcement by top trading partner China’s state planner fell flat.China’s finance ministry is due to hold a news conference on fiscal policy on Saturday. New Zealand’s dollar added 0.07% to $0.6067, trying to put some distance from the low of $0.6053 from Wednesday, when the central bank cut rates by a half point and hinted at further easing ahead, triggering a sharp slide in the currency. More

Milei vetoed a bill last month that would have updated public university funding in line with Argentina’s triple-digit inflation rate, one of the world’s highest. Thousands of people have since demonstrated against his cuts to education and healthcare.Lawmakers voted 160 in favor of the university funding law with 84 against and 5 abstentions, falling six votes short of the two-thirds majority of those present needed to reverse the president’s veto.Milei’s far-right party makes up only a small minority in Congress, but it has formed alliances with conservative lawmakers to prevent the opposition from gathering the two-thirds needed to ratify the law.”What we saw today was a power struggle,” conservative PRO party lawmaker Alejandro Finocchiaro told reporters. “If the presidential veto did not pass, it would have been a very bad sign for markets.”Milei argues that the law would jeopardize a fiscal balance he has promoted to tackle a long-running economic crisis, and has pledged to veto anything that threatens it. Argentina’s health, pension and education spending have been the hardest hit by Milei’s public cuts. The law vetoed by Milei would have adjusted public education budgets due to inflation. University salaries have lost around 40% of their purchasing power due to inflation.Under Milei’s austerity drive, high inflation has started to slow but Argentina is deep in recession and poverty rates have surged over 50%.But opposition to the president’s spending cuts, especially to education funding, still retains impassioned supporters.”The right to public education defines our nation,” opposition center-left UCR party lawmaker Facundo Manes said during the veto debate. “Education is the best economic policy of the 21st century, which is why we will not give up defending it.” More

LONDON (Reuters) – British finance minister Rachel Reeves may need to announce a 25 billion pound ($33 billion) tax rise in her first budget on Oct. 30 to help shore up public services such as prisons and police, the non-partisan Institute for Fiscal Studies said on Thursday.Labour set out 9 billion pounds of tax rises in its election campaign but the IFS said bigger tax increases would be needed for government budgets not to shrink as a share of the economy.”The new chancellor is committed to increasing investment spending, and to funding public services. To do so, she will need to increase taxes, or borrowing, or both,” IFS Director Paul Johnson said. The think-tank said a 25 billion pound tax increase would be almost 1% of national income and nearly twice as large as the tax increases after Britain’s last two major changes of government, in 2010 and 1997.Labour won a sweeping election victory in July but soon afterwards Reeves said the public finances had been left in a far worse state than she had feared. Prime Minister Keir Starmer’s popularity has fallen sharply, in part due to cuts to winter fuel subsidies for pensioners.”We have inherited a tough financial position, but we won’t let the challenges of the past define our future,” a finance ministry spokesperson said after the IFS forecasts.Reeves has said she will change the budget rules under which the finance ministry operates to target a balanced budget, excluding investment, rather than allowing a 3% deficit overall.However the exact definition of public debt is also under review, which the IFS estimates could allow 50 billion pounds more borrowing.Benjamin Nabarro, chief UK economist at U.S. bank Citi, who helped calculate the IFS forecasts, said there was “material concern” among foreign bond investors that tweaked rules could lead to much more debt.On Monday, the yield premium which 30-year British government bonds offer over German debt rose to its highest since former prime minister Liz Truss’ budget plans roiled markets in 2022.”After the recent market dislocation just two years ago, international investors are not really willing to give the gilt market the benefit of the doubt,” Nabarro said.Last week Reeves said there would be “guardrails” around any extra borrowing.”Having a very robust process of policing … is also crucial in terms of assuring gilt markets that this isn’t just being used as a piggy bank,” Nabarro said.($1 = 0.7652 pounds) More

The Royal Institution of Chartered Surveyors said on Wednesday that its main house price balance, which measures the difference between surveyors seeing falls and rises in house prices, moved into positive territory for the first time since October 2022.Its house price balance rose to +11 in September after a revised August reading of zero, well above the +4 forecast by economists in a Reuters poll. A net balance of +54 of surveyors expected house prices to increase in the coming year, the strongest reading since April 2022.A measure of expected sales for the next 12 months rose to a net balance of +45, compared to +3 a year ago. Tarrant Parsons (NYSE:PSN), RICS’ head of market analytics, said the reduction in borrowing costs in August had helped to recover buyer demand. “A further unwinding in monetary policy is anticipated over the months ahead, which should create a more favourable backdrop for the market moving forward,” Parsons said. The Bank of England’s benchmark Bank Rate now sits at 5% after August’s first reduction in borrowing costs in four years. The British central bank kept rates on hold last month. But investors on Wednesday assigned a roughly 83% chance of a quarter-point cut on Nov.7. Other gauges of Britain’s housing market have also pointed to a recovery, helped by expectations of another interest rates cut by the BoE. Figures from mortgage lender Halifax on Monday showed house prices grew in September at the fastest annual pace since late 2022.RICS said that a potential rise in capital gains tax in the new Labour government’s first budget later this month was prompting some homeowners to list their properties but that this was contributing to a lack of supply for renters.In the lettings market, demand continued to tick up and rents are projected to rise over the coming months.Finance minister Rachel Reeves has warned some taxes will have to go up in her inaugural Oct. 30 budget. More

With no change to the Fed policy rate, which the central bank had kept in the 5.25%-5.50% range since July 2023, the real rate of interest was rising, Daly said, “and that was ultimately a recipe, in my judgment, for breaking the economy…and not gaining anything new on the inflation trajectory.”And, she said, “I do not want to see further slowing in the labor market.”Last month’s half-point cut was therefore a way “to get policy in line with economy,” she said. “It doesn’t predict what we’ll do at the next meeting. It doesn’t tell you anything about the pace or magnitude of further adjustments.” Fed policymaker projections published last month suggest most see one or two quarter-point rate cuts at the remaining two Fed meetings this year, and Daly said Wednesday she agreed. “Two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind, given my projection for the economy,” she said.Fed policymakers have expressed a range of views about the degree of their enthusiasm for their September move, ranging from whole-hearted support to an acknowledgement that it “made sense” to, in the case of Fed Governor Michelle Bowman, outright dissent. Minutes of meeting released earlier Wednesday showed what did have across-the-board agreement was concern that the move “not be interpreted as evidence of a less favorable economic outlook.” Daly said she views the labor market, with an unemployment rate of 4.1%, as currently at full employment. More

(Reuters) – A look at the day ahead in Asian markets. Attention in Asia on Thursday is likely to center on Chinese stocks, and whether the previous day’s steep selloff extends further, and the U.S. dollar, which is on its longest winning streak in more than two years.The economic calendar is light, with only wholesale inflation and bank lending figures from Japan, and Philippines trade data, on deck. Currency and rates markets could get more impetus from Bank of Japan deputy governor Ryozo Himino and Reserve Bank of Australia assistant governor Sarah Hunter, who are scheduled to speak at separate events in Japan and Australia, respectively.The foreign exchange market, and the U.S. dollar in particular, is increasingly playing on the minds of investors across the continent. The New Zealand dollar fell 1.3% on Wednesday after the country’s central bank delivered a 50-basis point cut in interest rates and indicated it will ease policy further in the coming months. The kiwi has weakened 5% this month, making it the worst-performing major currency in the world this month.The greenback rose against a basket of major currencies on Wednesday for an eighth day, its best run since March-April, 2022, as the ongoing resilience of the U.S. economy draws flows into U.S. assets and forces investors to rethink their dovish outlook for U.S. interest rates.Demand for U.S. assets from Asia is also strong.Thursday may be a good test for Chinese markets, following Wednesday’s reality check. After surging as much as 40% in just six trading days, benchmark equity indices in China slumped 7% on Wednesday for their biggest one-day losses since February 2020. Will the pullback provide a more attractive entry point for investors who missed that initial whoosh? If so, the rally may have more to run, but a second day of losses may suggest investors need more from Beijing. China’s finance ministry will flesh out its plans to boost the economy at a news conference on Saturday, a sign that Beijing may be ready to roll out more forceful policies to revive growth.The People’s Bank of China, meanwhile, has steered the yuan away from the 7.00 per dollar level, at least for now. Tuesday’s fixing of 7.0709/$ was 0.9% higher than the previous fix, marking the biggest one-day rise since May 2022. Wednesday’s fix was a bit lower but still comfortably above pre-Golden Week holiday levels.  In Japan, inflationary pressures are expected to have eased in September, with annual wholesale price inflation falling to 2.3% from 2.5% in August. That would be the lowest since April.The monthly rate of deflation is expected to accelerate to -0.3% from -0.2%, which would be the fastest rate of month-on-month decline since May last year.Here are key developments that could provide more direction to markets on Thursday:- Japan wholesale inflation (September)- BOJ deputy governor Ryozo Himino speaks- RBA assistant governor Sarah Hunter speaks More

Florida, a top global tourism destination, is home to major theme parks like Disney World, Universal Orlando Resort, and SeaWorld (NYSE:PRKS) Entertainment.Hurricane Milton is forecast to make landfall in Florida on Thursday, with catastrophic damage and power outages expected to last for days.Disney’s theme parks and Disney Springs will be closed in phases beginning Wednesday and will remain closed on Thursday as well.Disney World also plans to temporarily close its campgrounds and rental cabins early on Wednesday, with closures likely to extend until Sunday.SeaWorld Entertainment announced plans to close its Orlando theme park on both Wednesday and Thursday. Comcast-owned Universal Orlando Resort said it will be closed on Thursday, according to its website. Additionally, Universal canceled its Halloween Horror Nights at Universal Studios Florida for both Wednesday and Thursday, although its resort hotels will remain open.Walt Disney (NYSE:DIS)’s experiences segment that includes parks and consumer products accounted for just over half of total profit in the fiscal third quarter. The segment recorded an operating income drop of 3%. More

At the conclusion of its previous meeting on Sept. 18, the Federal Open Market Committee, or FOMC, reduce its benchmark rate by 50 basis points to a range of 4.75% to 5%, marking the first rate cut since 2020. “A substantial majority of participants supported lowering the target range for the federal funds rate by 50 basis points to 4-3/4 to 5 percent,” the Fed minutes showed. The members believed that a larger cut would help “bring it into better alignment with recent indicators of inflation and the labor market.”In support of the decision to cut rates, many participants were encouraged by the softer inflation data in second and third quarter, which suggested “the stronger-than-anticipated inflation readings in the first quarter had been only a temporary interruption of progress toward 2 percent,” the minutes showed. While Federal Reserve Governor Michelle Bowman was the lone dissenter, preferring to lower rates by just 25bps, the minutes signaled that some members were also wary somewhat of kicking off the rate cutting cycle with a half point cut. “Noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision,” the minutes added.On the outlook for rate cuts, members expected that “if the data came in about as expected, with inflation moving down sustainably to 2 percent and the economy near maximum employment, it would likely be appropriate to move toward a more neutral stance of policy over time.”Adding to credence of the case for a smaller cut 25 basis point reduction, the minutes reflected that several participants noted that a smaller rate cut would be in line with a “gradual path of policy normalization that would allow policymakers time to assess the degree of policy restrictiveness as the economy evolved.”A few members, however, believed that the path of where interest rate are headed rather than the size of the cut at the September meeting would be more “important in determining the degree of policy restriction.”At the meeting, the Fed’s summary of economic projections, or SEPs, showed that Fed members changed their forecast on rate cuts. They estimated the need for another 50 basis points of cuts compared with a prior estimate in June for just one cut, with several further cuts, which would eventually take the central bank’s benchmark rate to 2.9% in 2026. On the labor market, several participants acknowledged that supply and demand in the labor market was roughly in balance, estimating that wage increases were “unlikely to be a source of general inflation pressures in the near future.”But a lot has changed since that Sept. Fed meeting.Data pointing to a stronger-than-expected labor market signaling strength in the economy has unnerved bets on further jumbo rate cuts, with some even questioning whether the central bank could pause its rate cutting cycle. “The market is now pricing fewer rate cuts than the Fed’s projections, which is a significant shift from just a few weeks ago,” UBS strategists said in a Tuesday note.Following the strong September jobs report, however, some Fed members continued to back further rate cuts, welcoming the strength in the labor market as sign the economy remains on track for a soft landing.    “Right now, I think monetary policy is well positioned for the outlook, and if you look at the SEP projections that capture the totality of the views, it’s a very good base case with an economy that’s continuing to grow and inflation coming back to 2%.” New York Fed President John Williams said on Tuesday. Markets had a muted reaction to the minutes, with broader market holding onto the bulk of gains as traders continue to markets expectations for a 25 basis point at the Fed November meeting was largely unchanged. “After the minutes, markets reduced the odds of a November 25bp cut to 75% from 87%, raising the odds of no cut to 25%, an overreaction as the Federal Reserve’s rhetoric isn’t hawkish,” Oxford Economics said in a note. More