EconoTicker

Kevin Hassett, Director of the White House Council of Economic Advisers, is emerging as a frontrunner to become the next Federal Reserve Chair. According to MUFG analysts, markets view Hassett as a close ally of President Trump, suggesting he would likely bring the administration’s preferred approach to interest-rate policy into the Fed. His potential appointment is being interpreted as a move that could tilt the central bank toward a more politically aligned and possibly more accommodative stance.

Market impact: Mildly bearish for USD; prospects of a politically aligned Fed increase expectations of lower-for-longer rates.

Fed funds futures now imply an 84% probability of a 25 bps rate cut at the next meeting, rising sharply after weaker U.S. retail sales and producer price data reinforced the view that inflation continues to cool. The softer numbers added momentum to market expectations for policy easing.

However, investors remain divided over whether the Fed will actually cut in December, as recent comments from several officials emphasized a meeting-by-meeting approach, tempering confidence in an immediate pivot.

Market impact: Mildly bearish for USD; rising rate-cut bets pressure yields, but mixed Fed communication limits conviction.

The U.S. Federal Budget Balance posted a –$284.0 billion deficit in October, a sharp reversal from the prior $198.0 billion surplus. The large shortfall reflects front-loaded government spending, higher interest costs, and seasonal factors tied to the start of the fiscal year.

Market impact: Mildly negative for USD; a wider fiscal deficit underscores long-term budget pressures but has limited near-term market impact.

U.S. M2 Money Supply increased to $22.30 trillion in October, up from $22.21 trillion previously. The rise signals a modest expansion in liquidity conditions as financial markets position ahead of the Federal Reserve’s December policy meeting.

Market impact: Neutral for USD; a mild increase in money supply does not materially shift the broader liquidity outlook.

Short-term and mid-term Treasury auctions delivered diverging results on Tuesday. The 52-week Bill auction cleared at 3.460%, slightly above the previous 3.445%, indicating marginally higher short-term funding costs. In contrast, the 5-year Note auction came in at 3.562%, below the prior 3.625%, reflecting firmer demand for medium-term maturities amid rising expectations of Fed rate cuts.

Market impact: Neutral for USD; mixed yield moves highlight steady demand while rate-cut expectations anchor mid-term yields.

The Atlanta Fed’s GDPNow model now projects 4.0% real GDP growth for Q4, slightly below the prior 4.2% estimate. The small downward revision reflects softer incoming economic data, though the overall growth outlook remains relatively robust.

Market impact: Neutral for USD; a modest downgrade does not materially alter expectations for solid Q4 growth.

The latest Dallas Fed survey showed that service-sector conditions in Texas improved in November, though both key indicators remained in contraction:

• Services Revenues: –2.5, better than the previous –6.4, indicating a slower pace of decline.
• Texas Services Sector Outlook: –2.3, up sharply from –9.4, reflecting a modest rebound in business sentiment.

Despite the improvement, the sector remains under pressure amid softer demand and cautious hiring.

Market impact: Neutral for USD; while contraction persists, the stabilisation trend offers a slightly more constructive signal.

The Richmond Fed’s regional data showed a sharp deterioration in November, with manufacturing and services activity both weakening:

• Manufacturing Index: –15, far below expectations of –5 and down from –4, indicating a deeper contraction across the sector.
• Manufacturing Shipments: –14, plunging from 4 previously, signaling a marked drop in output.
• Services Index: –4, reversing from 4 last month, pointing to softening demand in the service economy as well.

The across-the-board declines highlight mounting pressure on regional business activity, aligning with broader signs of cooling momentum.

Market impact: Negative for USD; weakening regional indicators reinforce expectations for policy easing and a softening economic outlook.

U.S. housing activity showed a stronger-than-expected pickup in October. Pending Home Sales (MoM) rose 1.9%, well above the 0.5% forecast and up from 0.1% previously. The Pending Home Sales Index also climbed to 76.3, compared with 74.9 before. The rebound suggests buyers are gradually returning as mortgage rates ease from recent highs.

Market impact: Mildly positive for USD; stronger housing activity hints at stabilizing demand, though overall levels remain subdued.

The Conference Board Consumer Confidence Index dropped to 88.7 in November, well below expectations of 93.5 and down from 95.5 previously. The steep decline highlights growing household concerns over the labor market, inflation, and overall economic outlook heading into year-end.

Market impact: Negative for USD; weaker consumer sentiment reinforces expectations of softer economic momentum and supports the case for a December rate cut.

U.S. inventory data for August showed no growth across key categories, signaling cautious restocking amid softer demand conditions:

• Business Inventories (MoM): 0.0%, matching expectations and slowing from 0.1% previously.
• Retail Inventories ex-Auto (Aug): 0.0%, below the expected 0.3% and easing from 0.1% prior.

The stagnant readings reflect cautious inventory management as firms brace for slower economic momentum heading into Q4.

Market impact: Neutral to mildly negative for USD; flat inventories point to restrained business activity.

U.S. home-price data from the S&P/Case-Shiller 20-City Index showed a mixed trend in September:

• 20-City HPI (MoM, s.a.): 0.1%, matching the prior reading.
• 20-City HPI (MoM, n.s.a.): –0.5%, slightly better than the previous –0.6%, reflecting typical seasonal cooling.
• 20-City HPI (YoY, n.s.a.): 1.4%, in line with expectations but down from 1.6% previously, signaling softer annual appreciation.

The data confirms that U.S. home-price growth continues to cool amid elevated mortgage costs and subdued affordability.

Market impact: Neutral to mildly negative for USD; stable but cooling home-price trends reinforce a softer housing backdrop.