Signal over Noise with Ulrike Hoffmann-Burchardi
At a Glance
The desk believes the US macroeconomic outlook is strengthening, driven by favorable earnings reports and positive CPI data leading into the October FOMC meeting. Per the full note from UBS' Ulrike Hoffmann-Burchardi, the benign CPI print suggests inflationary pressures are dissipating, positioning the Fed for a likely 25 basis point cut soon. This dovish pivot, coupled with improved earnings leading to potential GDP growth, indicates a bullish sentiment for the USD ahead of major policy adjustments. Furthermore, the desk anticipates **three broad disinflationary forces** will continue to support this outlook into 2026, reflecting robust market dynamics.
Key Takeaways
- 01US macro outlook is improving with strong earnings reports.
- 02CPI data supports expectations for Fed rate cuts; most likely 25 basis points in the upcoming meeting.
- 03Positive growth guidance could lead to 11% earnings growth for Q4.
- 04Disinflationary trends reinforce a bullish USD outlook into 2026.
Full Analysis
What the desk is arguing
The desk asserts that the signal from the US economy is one of strengthening fundamentals, characterized by better-than-expected earnings and a cooling inflation environment. As highlighted by Hoffmann-Burchardi of UBS, more companies are exceeding earnings expectations, setting the stage for a positive earnings growth outlook of 11% for Q4 if trends continue.
Additionally, the benign CPI reading of 3%, down 0.1% from expectations, signals less inflationary pressure, which should facilitate a smooth path for the anticipated Fed rate cuts in the upcoming meetings. This confluence of economic signals supports a more optimistic view of US growth potential.
Where it sits in our coverage
Our current consensus target for USD performance against key currencies stands at 1.075, with a range between 1.04 and 1.12. Firms such as jpmorgan and bofa have provided specific targets of 1.10 and 1.04, respectively.
This bullish view held by the desk aligns with the upper bound of this consensus range, as the evolving economic landscape strengthens expectations for the USD against major peers into 2026.
How other firms see it
Several firms are aligned with this optimistic outlook for the USD, particularly jpmorgan. Conversely, bofa presents a more cautious stance, indicating potential softness in the currency. This divergence underscores a broader market split on the immediate future of USD performance influenced by upcoming Fed policy shifts.
The trajectory of USD/EUR may closely reflect these dynamics, given the European Central Bank's own policy challenges and economic conditions, making it a pertinent pair to watch as developments unfold.
Market Implications
Traders should monitor USD/EUR closely for directionality, particularly following the anticipated Fed rate cut this Wednesday. The prevailing market sentiment could reinforce the USD's strength, pushing it closer to key resistance levels around 1.10 if earnings momentum sustains.
From the original
Tune in at the start of the trading week ahead of the New York opening bell as Ulrike Hoffmann-Burchardi, CIO Americas and Head of Global Equities for UBS Wealth Management, briefs you on what’s the signal, and what’s just noise in the markets. This week - the October FOMC rate d
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