🌏 International News:

Mixed U.S. Economic Data and Morgan Stanley’s Projections for High Inflation and Slow Growth
As the U.S. heads into the Thanksgiving and Christmas shopping season, its economic data reflects mixed signals. Highlights include:

• GDP and Inflation: The annualized Q3 GDP growth remains unchanged at 2.8%, while core PCE inflation for the quarter was revised down slightly to 2.1%. However, October’s core PCE inflation rose by 2.8% year-over-year, driven by rising service prices, marking the highest since April.
• Consumer Spending: Consumer spending hit its highest level this year, reflecting easing inflation pressures.
• Housing Market: Pending home sales surged in October, reaching a seven-month high.
• Other Indicators: Durable goods orders fell short of expectations, while PMI figures disappointed.

These mixed indicators have led the market to increase the likelihood of a 25-basis-point Fed rate cut in December from 59.4% to 66.5%. Additionally, strong demand in a 7-year U.S. Treasury auction pushed bond yields lower.

The U.S. dollar dropped approximately 0.9% to a two-week low, reversing gains from last week’s two-year high. Non-U.S. currencies strengthened broadly:

• Japanese Yen: Reached a five-week high near the 150 level, driven by speculation of a potential rate hike in December.
• Euro: Rose to a one-week high after comments from European Central Bank officials.
• Chinese Yuan (CNH): Gained 129 points, trading at 7.245 against the dollar.

Morgan Stanley Outlook:
Morgan Stanley forecasts that by 2025, the U.S. will face a prolonged period of high inflation and slow growth. Key points include:

The Fed is expected to cut rates gradually in 2025, reducing the federal funds rate to 3.625%. A pause is likely after May 2025, with the rate potentially dropping to 2.375% by late 2026.

Labor Market and Immigration Policies:

Net immigration is projected to drop from 3.3 million in 2023 to 500,000 by 2026 due to stricter immigration policies.

The tight labor market will persist, but slower economic growth may push unemployment up to 4.5% by 2026.

Inflation Trends:

Core PCE inflation may decrease to 2.8% in 2024 but remain above the Fed’s target, stabilizing at 2.5%-2.4% in 2025 and 2026.

Interest Rate Path:

The Fed is expected to cut rates gradually in 2025, reducing the federal funds rate to 3.625%. A pause is likely after May 2025, with the rate potentially dropping to 2.375% by late 2026.

Australia News

Aussie Dollar Shows Modest Recovery Amid Dollar Weakness

The Australian dollar (AUD) strengthened against the U.S. dollar on Monday, supported by:

1. U.S. Dollar Weakness: Ongoing corrections in the dollar’s value provided a tailwind for the AUD.
2. RBA Hawkish Stance: The Reserve Bank of Australia (RBA) reiterated its commitment to keeping rates restrictive until inflation sustainably returns to target levels, while emphasizing that future policy decisions will depend on incoming economic data.

The AUD/USD pair traded near 0.6515, showing signs of short-term momentum. However, it remains confined to a descending channel. Key technical levels include:

• Support: The 9-day moving average at 0.6492. A decisive break below this could lead the pair toward the lower boundary of its channel near the annual low of 0.6348.
• Resistance: The upper boundary at 0.6570. A breakout above this level could signal a shift in momentum, potentially pushing the pair toward a four-week high of 0.6687.

The RBA’s focus on forthcoming economic reports highlights the importance of data in shaping its next moves, keeping traders and analysts on edge.