USD: Rate cut speculation raises concerns – UBS

In a recent audio comment, UBS's Paul Donovan discusses the implications of Federal Reserve Governor Christopher J. Waller's advocacy for a December rate cut, emphasizing the potential risks to the US economy. The commentary highlights the mixed signals from economic indicators and consumer confidence. The report also touches on upcoming economic data that could influence market sentiment.

Waller's comments signal potential economic risks

"Federal Reserve Governor Waller advocated a December rate cut, citing labor markets. If Waller is seriously concerned about employment, this would be a worrying signal for the US economy, where growth depends on low unemployment fears."

"If this is an attempt to be picked as US President Trump’s new Fed chair, markets are likely to focus on the potential accommodation and ignore suggestions of economic risk."

"US September retail sales and producer price inflation are due. Credit card spending data suggests that middle and higher-income consumers in the US continue to be confident enough to spend (though not necessarily in retail outlets)."

"Producer price inflation details will offer hints as to second-round inflation effects — are US manufacturers raising prices (and profits) as importers pay tariffs?

"Data from Dallas suggested US companies are cautious, but that may be survey bias."