Shopify Stock Soars 25% As Q3 Earnings Double

Economic

Stocks

Summary:

Shopify stock soared 25% higher on Tuesday, making it one of the biggest movers.The jump was fueled by robust Q3 earnings, which saw adjusted earnings double.

Is Shopify stock a buy?

The e-commerce platform has had six straight quarters of 25% year-over-year revenue growth.

Shopify (NYSE: SHOP) stock was the biggest movers on Tuesday, skyrocketing more than 25% on the day to about $113 per share.

The e-commerce platform generated $2.16 billion in revenue in the quarter, up 26% year-over-year and ahead of analysts’ estimates of $2.11 billion. It was the sixth straight quarter with greater than 25% revenue growth.

Net income rose 15% to $828 million, but the preferred non-GAAP adjusted earnings spiked 99% to $344 million, or 64 cents per share. That crushed estimates of 27 cents per share. The adjusted earnings exclude the impact of equity investments in third parties, which are not relevant to the fundamentals of the business or indicative of operating earnings.

With today’s meteoric rise, Shopify stock is up about 53% year-to-date to around $113 per share.

GMV jumps 24%

The strong Q3 earnings were driven by robust activity on its shopping platform, combined with sound expense management.

Specifically, Shopify saw a 24% rise in gross merchandise volume, or GMV, to $69.7 billion, which beat estimates of $67.5 billion. The GMV represents the dollar value of orders facilitated through the Shopify platform. Further, its monthly recurring revenue (MRR), which is the number of merchants multiplied by the average monthly subscription plan fee, jumped 28% year-over-year to $175 million.

Overall, Shopify’s subscription solutions revenue climbed 25% to $610 million in the quarter while its merchant solutions arm saw revenue increase 26% to $1.55 billion, which beat estimates of $1.52 billion.

In addition, Shopify was able to keep expenses in check, as they rose just 7% compared to the third quarter of 2023, with general and administrative expenses actually falling 17% to $114 million.

This enabled Shopify to boost its free cash flow by 52% to $421 million, as it gained in each of the first three quarters this year. The free cash flow margin rose to 19%, from 16% in the same quarter a year ago. This is an important measure as it allows to invest in both operations and future growth.

“Q3 was outstanding, further establishing Shopify as a leader in powering commerce anywhere, anytime. Our unified commerce platform is becoming the go-to choice for merchants of all sizes,” Harley Finkelstein, president of Shopify, said. “As the busiest shopping season of the year for our merchants’ approaches, they trust Shopify to provide the tools, unmatched speed, and reliability to maximize their success.”

Is Shopify stock a good buy?

Investors were not only impressed by the strong growth; they were also heartened by Shopify’s Q4 outlook.

The firm anticipates another quarter of robust revenue growth, targeting a mid-to-high-twenties percentage rate spike in revenue in Q4.

Gross profit, which climbed 24% to $1.12 billion last quarter, is expected to see a similar growth rate in Q4 while operating expenses, as a percentage of revenue, are targeted at 32% to 33%. This would be lower than the approximately 38% rate last quarter.

Shopify earned some price target upgrades after Q3 results, including Evercore, which boosted it by $45 to $125 per share. In addition, Roth MKM boosted the target to $135 per share. That would represent a 13% to 22% increase in the share price.

But prior to the Q3 earnings release, Shopify had a median target of $80 per share, which would suggest a 29% drop.

The concern is the P/E ratio, which shot up to 98, with a forward P/E of 68. While it has enjoyed robust and sustained growth, that seems a bit too high and should be monitored.

Source: FXSTREET

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Pepperstone

Economic

WHERE WE STAND

Another day, yesterday, of relatively broad-based USD gains, as the ‘Trump Trade’ rolled on in the G10 FX arena, with both US growth and inflation expectations continuing to re-rate higher.

Momentum, as it has done all year, is also playing a pivotal role here, with fresh USD highs bringing more bulls to the party, maintaining something of a virtuous cycle for the buck. As a result of this, yesterday saw the DXY rally north of the 106 handle, while Bloomberg’s broader proprietary USD index, which also includes a handful of EMs, traded to its best level since 2022.

I still see it as tough to bet against the buck at this stage, with the idea of ‘US exceptionalism’ only gathering strength amid expectations that fiscal stimulus in the first 100 days of the second Trump Administration will provide a further fillip to growth. A cool CPI print today could present a ‘bump in the road’ for the greenback, though I’d argue that Friday’s retail sales print is more pivotal, given the importance of solid consumer spending in ensuring that broader economic growth remains resilient.

While US macro news is looking increasingly positive, the same cannot be said of the eurozone. Political uncertainty is the latest factor to blight the common currency, which we can add to a rather long ‘laundry list’ of other downside risks, including – the potential for inflation to undershoot the ECB’s target; ongoing geopolitical events in Ukraine and the Middle East; the lack of any notable recovery in China; and, the threat of Trump slapping tariffs on the bloc. I’m sure I’ve missed some from that list, such is its length!

Anyway, the political events in question of course come from Germany, where a ‘snap’ election will now be held next February. I feel ‘snap’ may be stretching it a bit, but that’s still 7 months earlier than had been originally planned. Of course, the German economy was hardly in the rudest of health before this dollop of political uncertainty, which is only likely to further depress near-term growth prospects, as evidenced by yesterday’s ZEW survey, where the expectations metric fell to a paltry 7.4,

Calls for EUR/USD to trade at parity seem to be growing louder, and understandably so, though I feel such expectations are a little punchy for now. Still, I’d be happy selling any EUR rallies for the time being, as we grind ever closer to the 1.05 mark, below the fresh 12-month lows printed yesterday.

Outside of FX, it was moves in the Treasury complex that caught the eye, with a rather brutal sell-off taking hold across the curve. The belly underperformed, with 5-10 year yields trading as much as 15bp higher, as benchmark 10s rose to 4.45% once more, as the curve in its entirety bear steepened. Treasuries do seem rather cheap here, though, with a 4.35% 2-year yield, and 4.45% 10-year yield, appealing given continued disinflation, and the Fed continuing to take policy back to a more neutral setting.

Meanwhile, despite the ‘Trump Trade’ being evident in both FX & FI, the same cannot be said of the equity space. The S&P 500 was unable to make it 52 record closes for the year, ending the day around 0.3% lower. Furthermore, the rotation out of tech, and into value, which had dominated Monday’s trade rather ran out of steam, with the Russell 2000 notably underperforming on the day.

Finally, crude traded marginally firmer, with Brent reclaiming $72bbl, despite OPEC cutting their global oil demand forecasts for the fourth month running. This could well be a case of demand expectations already being so pessimistic, that there is little more bad news to be priced in.

Still, with 2024 consumption estimates down by almost a fifth since July, China still in the doldrums, and potential supply hikes coming at the start of December, I struggle to find a bull case for crude here. That said, with tensions in the Middle East having high potential to flare up in the ‘blink of an eye’, short crude positions warrant caution, and I’d certainly not be keen on running any weekend risk.

LOOK AHEAD

It’s ‘CPI Day’ today, though I must admit that the monthly US inflation figures are not exactly the huge market-mover that they were earlier in the cycle. Chiefly, this owes to the FOMC having obtained sufficient confidence in inflation moving towards the 2% target, on a sustainable basis, over the medium-term, and subsequently having pivoted to make labour market developments the key driver of policy shifts going forward.

Nevertheless, the pace of headline inflation is seen quickening in October, to 2.6% YoY, up 0.2pp from September’s rate, though the bulk of this increase will come as a result of higher energy prices. Core inflation, consequently, is seen holding steady at 3.3% YoY, and 0.3% MoM. While the figures might cause some knee-jerk intraday vol, I can’t imagine today’s CPI print materially shifting the Fed policy outlook, with a 25bp December cut remaining my base case.

Away from CPI, today’s docket is a relatively quiet one. BoE MPC member Mann will be speaking, likely to explain her dissent in favour of holding rates steady at last week’s policy meeting. A handful of FOMC speakers are also due, though nobody is especially likely to deviate from the now well-established ‘data dependent’ script.

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ACY

Economic

Forex

The euro has recently faced significant pressure, making it the weakest among G10 currencies this week. This decline has been particularly marked against commodity currencies like the Norwegian krone, Australian dollar, and New Zealand dollar, pushing the EUR/USD pair close to a crucial support level around 1.0700. Several macroeconomic factors are weighing on the euro’s performance, including anticipated US tariffs, political instability in Germany, and divergent monetary policies between the European Central Bank (ECB) and the US Federal Reserve.

Currency Strength (EUR in Red)

US Tariffs and Economic Outlook

The anticipated policy shift under the Trump administration suggests that new tariffs on EU imports could materialize in the first half of the upcoming year. Economists are concerned that these tariffs may disrupt eurozone trade flows, potentially dragging down GDP growth by approximately 0.4 percentage points. While retaliatory tariffs from the eurozone could apply upward pressure on consumer prices, this may also strain the region’s economic growth trajectory.

Furthermore, the ECB is likely to continue reducing the deposit rate closer to 2.00% to stimulate the European economy. This outlook contrasts with the US Federal Reserve's more cautious approach, where expected rate cuts are projected to slow, especially with inflationary risks linked to Trump’s agenda. The interest rate differential has already widened, with US yields increasing more than those in the eurozone. Consequently, expectations for higher US interest rates and slower ECB cuts add further pressure to the euro, potentially driving the EUR/USD rate closer to the 1.0000 - 1.0500 range.

ECB Rate Forecasted to Cut 25bp on 12/12/2024

Euro Under Pressure Amid US Tariffs and German Political Shifts_2

Germany’s Political Landscape and Economic Implications

Adding to the euro’s challenges, Germany is experiencing heightened political uncertainty following the collapse of its coalition government. The breakdown, triggered by the dismissal of the finance minister, leaves the SPD party aiming to govern temporarily with the Greens until a confidence vote in mid-January. If this motion fails, as expected, a snap election could be called by March 2025, which might bring about a shift in Germany’s political spectrum.

Current polls indicate growing support for the centre-right CDU/CSU alliance, along with populist movements on both the right and left. If the CDU/CSU is unable to secure a majority, coalition negotiations could lead to further political gridlock, complicating Germany’s response to economic challenges. This uncertainty, if prolonged, may affect the euro’s stability, especially with a potential shift in policies that could impact trade, energy, and fiscal support for the German economy.

Energy Prices and Broader Economic Impact

The eurozone could potentially benefit from lower energy prices, which have recently shown a downward trend. If oil prices fall further, it could improve Europe’s trade balance and support consumer spending within the region. However, with uncertainty from impending US tariffs and possible political shifts in Germany, the benefits of lower energy costs might be muted, especially if tariffs stymie growth.

West Texas Oil Prices H4

Outlook for the Euro

Overall, the euro’s near-term prospects appear challenging, with the combined effect of US tariffs, Germany’s political instability, and diverging monetary policies likely to sustain downward pressure. While a shorter period of political uncertainty in Germany could mitigate some risks, the euro may still test lower thresholds in the EUR/USD range, particularly if US tariffs materialize and Germany’s government struggles to stabilize.

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Justin

Economic

(Nov 13): Billionaire Elon Musk and entrepreneur Vivek Ramaswamy will lead a new Department of Government Efficiency tasked to “dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure federal agencies”, US President-elect Donald Trump announced on Tuesday.

On the campaign trail, Trump said the government efficiency effort would develop a plan to eliminate “fraud and improper payments”, conducting a “complete financial and performance audit” of the federal government. On Tuesday, Trump said the panel would partner with the White House’s Office of Management and Budget and said their work will conclude no later than July 4, 2026 — the nation’s 250th anniversary.

The structure may allow Musk to avoid resigning from his companies including Tesla Inc, the world’s largest electric vehicle manufacturer, and SpaceX, which dominates the worldwide rocket launch market — and federal conflict-of-interest rules that could have mandated divestiture.

But it’s not clear what the size or structure will be, or how Musk and Ramaswamy will drive the dramatic overhaul of the government they have promised. The effort, which abbreviates to 'Doge', is a play on one of Musk’s favorite internet memes, and Musk has been an advocate of a the digital token Dogecoin. In a post to his social media network X, Musk suggested the government efficiency panel would offer merch.

Musk predicted he could cut at least US$2 trillion (RM8.90 trillion) from the US federal budget at Trump’s rally last month at Madison Square Garden, though that would exceed the amount Congress spends annually on government agency operations, including defense. It would likely require making significant cuts to popular entitlement programs such as Social Security, Medicare, Medicaid and veterans’ benefits.

Last fiscal year, the government spent more than US$6.75 trillion, with more than US$5.3 trillion of that coming from Social Security, healthcare, defence and veterans’ benefits — all of which are politically fraught and notoriously difficult to convince Congress to cut — as well as interest on the debt.

“This will send shockwaves through the system, and anyone involved in Government waste, which is a lot of people,” Musk said on Tuesday in a statement provided by the Trump transition effort.

Musk, 53, saw his net worth top US$300 billion shortly after the election — the first time he’d surpassed that mark in almost three years. He is the only person to ever have a fortune in excess of US$300 billion, according to Bloomberg’s wealth index. Tesla shares, which were trading about 1.5% lower in the after-hours session before Trump’s announcement, pared losses slightly after the news.

Musk is likely to serve as a special government employee, the formal designation for individuals outside of government brought in for short periods to lend their expertise.Ramaswamy, an Ohio businessman, mounted a bid for the GOP nomination himself but largely echoed and amplified Trump’s position.

Prominent allies

During his run, Ramaswamy, 39, was loathe to criticise Trump, praising the Republican standard-bearer and endorsing many of the policies the incoming president has espoused, including scaling back the size of the federal government and pulling back from foreign alliances.

Ramaswamy also backed ending US aid to Ukraine, called at one point for a wall along the US-Canada border to halt the spread of fentanyl and has been an advocate for the cryptocurrency industry, calling for rolling back regulations and implementing drastic cuts to the Securities and Exchange Commission.

His staunch support for Trump, fuelled by some breakout moments in primary debates that saw him attack some of the president-elect’s top rivals for the nomination, helped him build his standing among conservative voters. Ramaswamy would go on to be a fervent surrogate for the president-elect, earning Trump’s praise.

While Trump ruled him out as a running mate, he weighed him as a possible Cabinet pick as early as March, according to people familiar with the matter at the time.

On the trail, Trump praised Ramaswamy as “smart”, and expressed hope that he would be part of a second-term administration.

“We can put him in charge of one of these big monsters, and he will do a better job than anybody you can think of,” Trump said at a campaign rally in October.

Source: Theedgemarkets

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FOREX.com

Economic

Forex

Overview

Wednesday’s US consumer price inflation report could be the catalyst to spark an extended Fed pause, likely fuelling further gains in the US dollar against other major currencies.

With the economy powering ahead, even before the prospect of highly expansionary fiscal policy from the Trump administration, further signs of sticky inflationary pressures could push markets to flirt with the idea that the next Fed move may be a hike. As unlikely as that sounds, it’s something traders need to be prepared for as they double down on Trump trades, underpinned by expectations for a string of rate cuts ahead.

US inflation fight may not be over

The US economy simply won’t quit, defying expectations that higher interest rates would slow it down meaningfully. Instead, growth is running well above perceived potential, pointing to the risk of lower unemployment and higher inflation.

The Citi Economic Surprise Index has surged to multi-month highs, as shown below, with most data releases now topping forecasts despite much higher market expectations. Tellingly, US inflation surprises are now moderating after undershooting earlier this year. Longer-term market-based inflation expectations are also at multi-month highs, reflecting concerns the Fed may not be able—or willing—to bring inflation back to its mandated 2% target.

US Dollar Rips Higher as Simmering Inflation Fears Crush Fed Rate Cut Hopes_1

US core consumer price inflation has risen 0.3% in each of the past two months, with another 0.3% print forecast later today. Annualized on a one- and three-month basis, that's nearly double the Fed’s 2% target. While it’s not the Fed's preferred measure, 0.3% gains simply don’t get the job done.

Fed rate cut pricing evaporating fast

With inflation concerns rising, expectations for Fed rate cuts by the end of 2025 are evaporating faster than a puddle in Death Valley during summer. When the Fed started its easing cycle in September, markets anticipated nearly eight 25bps cuts between November 2024 and December 2025. Now, that’s down to three. The trend is obvious, and it's powering US dollar strength.

US Dollar Rips Higher as Simmering Inflation Fears Crush Fed Rate Cut Hopes_2

and that’s fuelling US dollar strength

The next chart shows the rolling 10-day correlation between the US dollar index (DXY) and US interest rates across the yield curve. The strongest relationship has been with short-term rates, most influenced by monetary policy expectations.

So, it’s no surprise that on the same day US two-year Treasury yields hit fresh post-election highs, the DXY surged to multi-year highs.

US Dollar Rips Higher as Simmering Inflation Fears Crush Fed Rate Cut Hopes_3

Contrary to some headlines, the dollar move is more about the Fed than Trump’s policies directly. Trump’s policies influence what the Fed may do, but even before the election, it was clear the US economy didn’t need a deep rate-cutting cycle to keep unemployment low.

DXY breaks nemesis downtrend

It’s not just fundamentals contributing to the bullish US dollar story. Technicals are also working in its favour with the DXY breaking above a long-running downtrend that has sparked multiple bearish reversals in the past. The weekly chart tells the story.

If we don’t see a meaningful reversal back below the trendline in the coming days, which would likely require a significant US inflation undershoot or retail sales data on Friday to unravel from a fundamental perspective, it may embolden traders to buy the break looking for a continuation of the bullish move. Momentum is to the upside, with common indicators such as RSI (14) not yet overbought on the weekly timeframe.

US Dollar Rips Higher as Simmering Inflation Fears Crush Fed Rate Cut Hopes_4

As the two largest constituents in the DXY, the technical picture for EUR/USD and USD/JPY is arguably more important than the dollar index given relative volumes traded in both pairs.

EUR/USD sick and unloved, understandably

EUR/USD looks like it's ready for last rites on the daily timeframe, briefly sinking to multi-year lows on Tuesday before bouncing into the close. With Europe’s largest economy in political turmoil and no obvious plan to boost activity other than cutting interest rates, only an undershoot in the US inflation report may prevent a deeper slide for the euro.

US Dollar Rips Higher as Simmering Inflation Fears Crush Fed Rate Cut Hopes_5

A break and close below 1.0602 would generate a bearish setup, allowing shorts to be established with a stop above for protection. Potential downside targets include 1.0517 and 1.0448—two prior market troughs. Momentum is with the bears, and RSI (14) is not yet oversold on the daily, reinforcing the bias to sell squeezes and downside breaks in the near term.

Honestly, the only thing the euro has going for it right now is just how unloved it is, creating the potential for short-term squeezes. But without fundamentals underpinning them, these rallies are likely to be brief.

USD/JPY bulls regain ascendancy

When writing the USD/JPY week ahead report over the weekend, the reversal in US Treasury yields following the initial post-election surge had me thinking that risks were tilting lower, especially with momentum rolling over. How wrong I was!

Not only has USD/JPY gone in the opposite direction, but it’s also taken out last week’s high. With RSI (14) and MACD on the verge of generating fresh bullish signals, and the price remaining in an obvious uptrend, the path of least resistance is now skewing higher, barring a US inflation undershoot.

US Dollar Rips Higher as Simmering Inflation Fears Crush Fed Rate Cut Hopes_6

As someone who dislikes intraday scalping, I prefer to let bullish setups come to me rather than force lower-probability plays.

155.36 is a level on the radar, a minor level that acted as support and resistance briefly in early stages of the bearish USD/JPY unwind that began in July. A break of that could encourage traders to buy with a stop beneath for protection. A retest of the level—if broken—could improve the trade’s chances of success. Pullbacks towards the uptrend established in early October would also offer a setup, allowing longs to be established with a stop beneath for protection. Aside from 155.36, 160.23 and 161.95 loom as possible targets.

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Alex

Forex

Economic

The Indian Rupee (INR) trades in negative territory on Wednesday after reaching a fresh all-time low in the previous session. The local currency is under pressure due to substantial foreign institutional outflows and heightened US Dollar (USD) demand. Despite a strengthening Greenback and outflows from local stocks, the downside for the INR might be limited amid routine interventions from the Reserve Bank of India (RBI) to sell the USD to stabilize the currency. Later on Wednesday, traders will closely monitor the US October Consumer Price Index (CPI), along with the speeches from John Williams, Lorie Logan, Jeffrey Schmid and Alberto Musalem.

Indian Rupee seems vulnerable ahead of key US CPI inflation data

India's retail inflation, based on the Consumer Price Index (CPI), rose to a 14-month high at 6.21% YoY in October versus 5.49% prior, higher than the 5.81% expected.

India’s food inflation jumped to 10.87% from 9.24% in September 2024 and 6.61% in October 2023, according to the latest official data released on Tuesday.

Indian Industrial Production grew by 3.1% YoY in September from a decline of 0.1% in August. This figure came in better than the estimation of 2.5%.

Foreign investors withdrew nearly $3 billion from local stocks in November, adding to the $11 billion of outflows in October.

Minneapolis Fed President Neel Kashkari said on Tuesday that the Fed feels confident about its long-running battle with transitory inflation, but it’s premature to declare outright victory. Kashkari further stated that the US central bank won't model Trump policies' effect on the economy until they become clear.

Richmond Fed President Tom Barkin noted on Tuesday that while inflation appears to be coming down, it might still get stuck above the Fed's target levels.

USD/INR’s positive outlook remains in play in the longer term

The Indian Rupee softens on the day. The constructive view of the USD/INR pair remains unchanged on the daily chart, with the price holding above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) exceeds 70, indicating an overbought condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.

The immediate resistance level for USD/INR emerges at 84.50. A break above this level could draw in enough bullish pressure to the 85.00 psychological level.

In the bearish event, sustained trading below the resistance-turned-support level at 84.30 could expose the 84.05-84.10 region, representing the lower limit of the trend channel and the high of October 11. The next downside filter to watch is 83.85, the 100-day EMA. USD/INR Strengthens On Persistent Outflows, Firmer US Dollar_1

Indian Rupee FAQs

What are the key factors driving the Indian Rupee?

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

How do the decisions of the Reserve Bank of India impact the Indian Rupee?

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

What macroeconomic factors influence the value of the Indian Rupee?

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

How does inflation impact the Indian Rupee?

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.

Source: FXSTREET

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FastBull Featured

Daily News

Economic

[Quick Facts]

1. Kashkari: With inflation easing, interest rates are expected to be lower.

2. Barkin: Fed is 'in position' to respond to risks as needed.

3. Barclays: Trump 2.0 won't lead to major changes in the oil market.

4. NY Fed: Inflation expectations ease; labor market expectations improve.

5. OPEC cuts global oil demand growth forecasts for a 4th straight month.

[News Details]

Kashkari: With inflation easing, interest rates are expected to be lower

We are surprised by the resilience of the U.S. economy, Minneapolis Fed President Neel Kashkari said on Monday, the current economic fundamentals look strong, and I am optimistic about the continuation of this trend.

However, inflation has not yet fully reached the Fed's target of 2%. Given the high rate of housing inflation, it may take one or two years to reach this goal.

We will focus on the upcoming inflation data to determine whether another rate cut is appropriate at the Fed's meeting in December, Kashkari said. If inflation unexpectedly rises in December, we may pause rate cuts.

With strong productivity growth, the neutral interest rate may now be higher. This could lead to a smaller reduction in interest rates in the coming months than previously expected. The current policy is "moderately restrictive," and short-term borrowing costs continue to weigh on inflation and the economy, but not significantly. "My judgment is that we are still in a moderately tightening stance, but ultimately, the economy will guide us to further rate cuts," Kashkari added.

Barkin: Fed is 'in position' to respond to risks as needed

Currently, U.S. inflation is close to the Fed's target of 2%, the labor market is resilient, and the Fed is in the process of reducing borrowing costs, Richmond Fed President Thomas Barkin said on Monday. Therefore, Fed policymakers are prepared to respond quickly if inflationary pressures rise or the labor market weakens.

Increasingly price-sensitive consumers are helping curb inflation, and the labor market has remained resilient as companies have held on to talent. Productivity is up in part because companies made investments in automation during the pandemic and also now have a more experienced workforce amid lower turnover. The economy is in a good place, which has allowed the Fed to lower borrowing costs.

The next actions of the Fed will depend on how businesses perform. After the interest rate cuts and the U.S. election, businesses will either feel more confident about the future or continue to implement an "economic recession strategy" by cutting jobs to cope with limited pricing power.

As election uncertainty fades, companies could begin investing and hiring again, leaving the Fed to focus on upside inflation risks. Or, companies could respond to margin compression from weaker pricing power by firing workers, which would elevate employment risks for the Fed.

Barclays: Trump 2.0 won't lead to major changes in the oil market

Barclays Bank reports that Trump's second term is unlikely to have a significant short-term impact on the oil market fundamentals. The bank believes the current market dynamics are relatively stable, and no major changes related to potential shifts in U.S. leadership are expected.

Barclays recommends a long position on December 2025 Brent call spreads. The bank noted that oil market volatility has recently declined, with market sentiment overly focused on downside risks. In contrast, Barclays views risks as more balanced, especially considering the recent improvement in oil market fundamentals and the potential for a more confrontational geopolitical landscape.

NY Fed: Inflation expectations ease; labor market expectations improve

The New York Fed's Center for Microeconomic Data released its October 2024 Consumer Expectations Survey, showing a slight decline in inflation expectations for the short, medium, and long term, while labor market expectations have improved. Lower unemployment rates and unemployment risks were reported. Respondents indicated that, if laid off, the likelihood of finding a new job has increased.

There has been an improvement in the outlook for credit access in October, with higher expectations for credit availability in the future. Households also reported a reduced likelihood of failing to repay the minimum debt on time in the next three months.

OPEC cuts global oil demand growth forecasts for a 4th straight month

OPEC released its latest monthly report on Tuesday. The report shows that global oil consumption in 2024 will increase by 1.8 million barrels per day, a growth rate slightly below 2%. The latest forecast is 107,000 bpd lower than the previous prediction, with the global oil consumption for this year expected to average 104 million barrels per day. OPEC expects that by 2025, the daily oil demand will increase by another 1.5 million barrels, 103,000 barrels less than the previous forecast.

Despite OPEC's continued downward revision of oil demand, its outlook for the market is still more optimistic than other forecasters. Whether it's the IEA, Wall Street banks and trading firms, or even Saudi Aramco, all of them have a less optimistic outlook for the oil market than OPEC.

According to OPEC's monthly report, the organization's oil production in October came in at 26.535 million barrels per day, up from 26.069 million bpd in September. Saudi Arabia's oil production in October was 8.968 million bpd, compared to 8.964 million bpd in September.

Under Saudi Arabia's leadership, OPEC and its allies have delayed their production increase plans twice. According to the latest plan, moderate monthly production increases will begin in early next year. OPEC+ will review this at its meeting on December 1.

[Today's Focus]

UTC+8 15:00 U.K. CPI (Oct)

UTC+8 17:45 Bank of England MPC Member Mann Speaks

UTC+8 21:30 U.S. CPI (Oct)

UTC+8 22:35 Dallas Fed President Logan Speaks

UTC+8 01:00 Next Day: EIA Monthly Short-Term Energy Outlook Report

UTC+8 01:30 Next Day: St. Louis Fed President Musalem Speaks

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Shopify Stock Soars 25% As Q3 Earnings Double

Is Shopify stock a buy?

GMV jumps 24%

Is Shopify stock a good buy?

Source: FXSTREET

The Buck Continues To Bound Higher

WHERE WE STAND

LOOK AHEAD

Euro Under Pressure Amid US Tariffs and German Political Shifts

US Tariffs and Economic Outlook

Germany’s Political Landscape and Economic Implications

Energy Prices and Broader Economic Impact

Outlook for the Euro

Trump Picks Musk, Entrepreneur Ramaswamy For Govt Efficiency Effort

Prominent allies

Source: Theedgemarkets

US Dollar Rips Higher as Simmering Inflation Fears Crush Fed Rate Cut Hopes

Overview

US inflation fight may not be over

Fed rate cut pricing evaporating fast

and that’s fuelling US dollar strength

DXY breaks nemesis downtrend

EUR/USD sick and unloved, understandably

USD/JPY bulls regain ascendancy

USD/INR Strengthens On Persistent Outflows, Firmer US Dollar

Indian Rupee seems vulnerable ahead of key US CPI inflation data

USD/INR’s positive outlook remains in play in the longer term

Indian Rupee FAQs

Source: FXSTREET

November 13th Financial News

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