The USD surged to an 11-week high yesterday after a robust retail sales report led investors to reduce bets on Fed rate cuts this year. Retail sales were broad-based, and the "control group" metric rose 0.7% in September, exceeding the median forecast of 0.3%. US Treasury yields climbed, and the S&P 500's new all-time high was short-lived. Prediction markets showed increased odds of a Trump victory.

The ECB cut rates as expected, and the euro fell as investors increased bets on a 50-basis-point cut at the December meeting.

Today, the USD is trading 0.25% lower, and Treasuries are stabilizing after yesterday's heavy selling. Overnight, China's Q3 growth slowed to its slowest pace in six quarters. In response, the Chinese central bank announced new measures to boost capital markets as they continue to grapple with the domestic economic slowdown. Japan's Vice Minister of Finance, the country's top FX official, noted "At the moment, we're seeing slightly one-sided, sudden moves in the currency market," helping the yen advance after reclaiming the 150 level for the first time since August 1st. The Fed's Waller, Bostic, and Kashkari are scheduled to speak today.

EUR/USD fell 0.3% yesterday and is 0.2% higher today, trading about 0.8% lower than this time last week. The ECB cut their policy rates yesterday for the third time in this cycle, and investors interpreted the event as dovish. While acknowledging the disinflationary process is well on track, officials noted downside growth risks following recent weakness in economic indicators. Investors are now pricing in a 50% chance of a 50-basis-point policy easing move at the ECB's December 12th rate decision.

GBP/USD rose 0.15% yesterday and is 0.3% higher today, trading approximately 0.15% lower than this time last week. September retail sales data was notably strong, posting a 3.9% year-over-year advance compared to the median forecast of 3.2%. Wage gains exceeding inflation and fiscal policy loosening are enabling consumers to spend at a healthy pace. The BOE's November rate decision remains fully priced for a 25-basis-point cut.

USD/CAD rose 0.3% yesterday and is marginally higher today, trading about 0.3% higher than this time last week. It's on track for its third straight weekly advance as we approach the BOC's rate decision next Wednesday, October 23rd. Implied swap odds are pricing in just over a 50% possibility of a 50-basis-point cut next week. The recent downside inflation surprise is seen strengthening the case for faster and/or larger cuts.