US widens growth gap

Market reports
Lawrence Kaplin
  • US PMIs show evidence of growing activity
  • UK and EU remain set to contract further
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On Monday, Bill Gross suggested that the US economy is likely to be heading into a recession in the last quarter of this year – USD sold off. Yesterday's PMI numbers suggest otherwise, with October’s manufacturing and services PMI coming in better than expected, and putting the composite PMI number higher than in September – USD clawed back almost all the losses from the Monday. Composite PMI numbers from Europe showed further contraction in activity, and the UK numbers suggest slightly slower contraction than expected. GBP and EUR both lost ground as a result


Market rates

* Daily move - against G10 rates at 7:30am, 25.10.23

** Indicative rates - interbank rates at 7:30am, 25.10.23

Data points


  • None today.

Our thoughts

Quiet day for the markets today with the Bank of Canada rate decision the main focus, although we are expecting the bank to hold rates at 5%. AUD has gained marginally this morning on the back of inflation not falling as much as expected, with markets now putting a 50% chance of a rate hike in November. Following on from yesterday’s data, it seems we are going to see yesterday's moves continue which ultimately means stronger USD, and weaker GBP and EUR.

Chart of the day

The US economy doesn’t seem to be showing any signs of slowing going into the last quarter of this year if Octobers PMI numbers are anything to go by. Economic activity in the US continues to outperform the UK and Europe, and although Bill Gross commented on Monday that the US is likely to head into a recession in Q4, yesterday seems to suggest otherwise. Although worth nothing that this is one set of data, and we have a long way to go to see how the economy performs going into year-end. So, although USD recovered yesterday, it will be interesting to see if this continues.

Source: Bloomberg Finance L.P.

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