Does Trump come out and do something specifically to drive USD back down?

The Atlanta GDPNow came in at 4.0% for Q3, with a refreshed estimate coming on the 6^th. This is a small gain from 3.9% last week and due to the ISM report showing “real gross private domestic investment growth increased from 4.4 percent to 4.6 percent.”

There it is—an economy that is robust and resilient. Over long period of time, the economy with the highest growth tends to have the stronger currency.

The ADP private sector jobs report arrives tomorrow, this time for the month and not just the weeklies we were getting. The consensus is for a measly 30,000 job increase. See the chart from Heisenberg. Heisenberg writes that the 3-month average for the ADP headline has not been zero since August 2020 (height of pandemic).

So far we have a Bloomberg replay of the Challenger lay-0ff report, which showed a screaming warning, with big names like Starbucks, Target, and Amazon cutting jobs.  In the year through Sept, job cuts numbered “almost 950,000 US job cuts this year through September, the highest year-to-date total since 2020. The size and pace of layoffs suggest managers are losing their fear of firing, emboldened by AI and automation gains, and instead of hoarding workers, companies are trimming their labor costs to protect their profits.”

We are having a hard time squaring a labor shortage earlier this year with fewer jobs and rising unemployment now. Two possibilities: (1) fewer NEW jobs because companies are filled with uncertainty, can substitute AI or robots, or cutting back output and (2) the labor that is available won’t change locations or is not qualified because uneducated, drug addicted, obese, lazy, too old/too young, etc. We don’t even have to dig into the demographics (retirements at record pace, loss of immigrants).

About that December Fed rate cut: the Fed funds betting market is still not convinced that it’s a dud. Yesterday the probability of a cut had fallen to 67.5% from 94.4% the week before (Oct 27^th). That’s still well over 50-50.

About that BoE rate cut: The BoE meets Thursday. As noted yesterday, some big banks expect a cut while the majority say inflation is too high for a cut.  Bloomberg had a story with this headline: “Reeves Plots Bolder UK Budget as Labour Fears Tinkering Won’t Do.” The budget is due Nov 26. Chancellor Reeves is running a PR show to get responses to various ideas, mostly involving “tax the rich.”

Targets include expensive homes, taxes on online gambling, taxes on those exiting the country (!) while keeping the personal tax threshold the same for everyone else. Bloomberg writes “While those emigrating from the country can currently sell UK assets after leaving without facing capital gains tax, the chancellor is mulling making them pay a 20% charge at the point of departure, the newspaper reported. It would raise some £2 billion for the Treasury.” This is actually pretty big, 6% of the needed £35 billion.

Forecast

The firmer dollar is a reflection of the strong economy in comparison with others, where growth is far less.

Even in emerging markets like Mexico, where growth is about 1.5% and inflation being controlled, the dollar is gaining ground. This has been in development for some weeks—see the chart.  And it’s despite the 10-year Mexican note at 8.65%, more than double the US. Similarly, Brazil’s 10-year is a whopping 13.805%. China, which gave Trump the gift of a collapsing dollar ahead of the summit, is showing a rising dollar in its managed market.

Unfortunately, comparative yields are not the only factor in FX. 

The dollar upmove is growing legs, as we feared, despite the many negatives. One ray of light is that Trump doesn’t like a stronger dollar. Does he come out and do something specifically to drive it back down? Yeah, probably, in time. We suspect we could get another comment about the yen to set things off. Japan is not exactly hiding under the bed, but is famously careful about annoying the US, especially this ogre.

Tidbit: The BoA Global Fund Managers report this time has a wonderful chart showing how five of the top risks expected in 2025 were failures. See the chart.

So, what are the big risks going forward? We’d guess the topmost one is the Big 7 tech names hitting a brick wall and collapsing the stock market bubble via contamination. You can’t open a business page anywhere and not see a discussion of the bubble. There are, however, some good arguments against it being a bubble in the first place.

This is not our wheelhouse and we will not opine, but history tells us that even legitimate new technologies (railroads) get overdone. The earnings and progress changes are real, but they don’t occur in the timeframe of “expected earnings” of the names. And some of the names are cons with false earnings and other metrics. This instantly reminds you of crypto, right? Same deduction. It’s new. Many investors think they are actually getting those fictious gold coins pictured in every crypto promotion.

We have the wisdom of crowds. We also have the madness of crowds.  We guess right now we are in the wisdom zone. Does madness always follow? The Kitchin cycle is about 40 months or 3.33 years. If the tech bubble started in Nov 2022 (the data named by Google AI), it should crashing down in Feb or March 2026.  

US Politics: New polls show Trump’s favorability ratings on every issue falling like rocks. The NYT combines them all to get a favorable rating of only 43% vs. 55% disapproval. Some of the spreads between favor/disfavor are very, very wide. Trump gets no higher favorability on any single issue. There is a hint that voters in New Jersey and Virginia will vote today to show Trump approval/disapproval rather than an outright vote for the candidates and the California re-districting to counter Republican gerrymandering. We will know by 11 pm tonight.

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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