Fed minutes reveal hawkish holdouts

While there was only one dissension at the September FOMC meeting for the Fed where it cut rates by 25bps – recent President Trump appointee Stephen Miran argued for a 50bps cut – rather than the three that had been feared, the minutes for the meeting released last night indicate that there remain significant differences in opinion as to the greater risk to macroeconomic stability in the US, with a ‘few’ policymakers seeing ‘merit’ in keeping rates unchanged given that inflation remains above the target 2% level. The impact of politics, in particular the potential inflationary effect of President Trump’s tariffs, remains to the forefront of rate-setters minds. Nevertheless, the majority see the case for further rate cuts and the likelihood remains that there will be two more 25bps cuts to rates before the year is out, which would almost certainly be mirrored by the UAE Central Bank.

Headline CPI inflation in Egypt slowed to 11.7% y/y in September, down from 12.0% the previous month. This marked the fourth month in a row that price growth slowed, and was the lowest level since March 2022, before the commodity price spike that helped propel Egypt’s inflation rate to a peak of 38.0% in September 2023. Base effects from the elevated level 12 months earlier helped slow inflation on an annual basis despite an acceleration in m/m inflation to 1.8% in September, from 0.4% previously, driven by a sharper monthly uptick in food prices which rose 1.9% m/m. On an annual basis though, food & non-alcoholic beverage prices were up just 1.4%, down from 2.1% in August and compared with a recent peak of 73.6% in September 2023.

Today’s Economic Data and Events

11:00 Turkey industrial production, % m/m, August.

16:30 US initial jobless claims, week to October 4. Forecast: 228,000

Fixed Income

• US treasuries were little moved for the lack of data or major news stories released yesterday. Yields on the 2yr closed up 2bps at 3.5802%, while the longer end of the curve was more static with the 10yr closing down by less than 1bps at 4.1171%.

FX

• The dollar index closed up for a third straight session yesterday, adding 0.3% against its basket of peers. Gains were broad based, with only AUD among the majors to strengthen against the greenback as it gained 0.1%.
• Political uncertainty weighed on both EUR, which closed down 0.3% at 1.1628, and JPY which lost 0.5% to end the session at 152.69.

Equities

• The rally in US equities resumed yesterday, with the NASDAQ in particular seeing gains as it rose 1.1% on the day. The S&P 500 closed up 0.6% while the Dow Jones closed flat.
• Locally, the DFM added 0.3% and the ADX closed 0.5% higher. Saudi Arabia’s Tadawul ended down 0.2%.

Commodities

• Gold added a further 1.4% yesterday to close at 4,042.03, the first close above the 4,000 mark.
• Oil prices saw strong gains yesterday, although both benchmarks have softened in early trading this morning on the back of positive indicators around the Gaza peace plan.
• Brent futures added 1.2% yesterday to close at USD 66.3/b, while WTI closed up 1.3% at USD 62.6/b.