ECB Holds Rates but Sources Signal December Hike Ahead
The ECB stood pat Thursday while insider sources flagged a December hike and pause. Markets absorbed mixed US data, Alphabet's plunge, and Iran tensions.
The European Central Bank held interest rates unchanged Thursday, but the session's real story emerged from sources reporting that policymakers are targeting a December rate increase followed by a deliberate pause — a signal that pushed the euro off its early lows to close modestly in positive territory. ECB President Christine Lagarde reinforced a cautious hawkish tone by pointing to persistent energy-driven inflation feeding through the broader economy.
US economic data delivered a mixed picture. Third-quarter GDP came in at 3.4%, beating the 3.2% estimate, while September core PCE inflation surprised to the upside at 0.5% month-over-month against a 0.3% forecast — a combination that kept rate-path uncertainty front and center. Weekly jobless claims of 194,000 undercut the 199,000 consensus, underscoring continued labor market resilience.
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Equity markets weathered a sharp blow from Alphabet, which shed 12.5% after earnings raised concerns that artificial intelligence tools are cannibalizing its core search business. Even so, the broader damage was contained: the S&P 500 slipped just 0.3% and the Nasdaq fell 1.3%, helped in part by Eli Lilly surging 6.5% to a record high following strong weight-loss drug trial results. Advancers outpaced decliners, and the small-cap Russell 2000 gained 0.7%, suggesting investors read the Fed's latest posture as less aggressive than feared.
Geopolitical risk kept oil markets volatile. A US senator on the Foreign Relations Committee warned publicly of what he called "insane" American plans to strike civilian infrastructure in Iran, while separate reports cited Iranian attacks on vessels near the Strait of Hormuz and Houthi strikes on Saudi facilities — factors that partially offset earlier crude selling. WTI settled around $102.32, down modestly on the session.
After the closing bell, futures retreated sharply after Intel and Amazon both fell double digits on their earnings headlines, threatening to extend Thursday's equity weakness into Friday's open. Continue reading at Forexlive.
