US FX WRAP: Dollar weighed as US yields trickle lower post Fed as personal income and spending growth miss forecasts

USD: Price action was mixed against peers, leaving the DXY slightly down, as a lower-yield backdrop weighed on the buck. Yields across the curve traded lower in response to a PCE report that matched expectations on inflation, accompanied by shortfalls in personal income and spending growth vs forecasts. Thereafter, losses in tech extended at the cash open, igniting concerns over AI profitability following Alphabet's disappointing earnings report (EPS and revenue missed). The move soured sentiment, reversing Microsoft's initial pop higher on its earnings beat, while memory and software were also hit as names in both sectors underwhelmed on earnings, adding to pressure on US tech.

Meanwhile, the advance Q3 GDP release beat expectations, with growth at 3.4% on an annualised basis, while quarterly inflation figures eased. The Atlanta Fed's initial GDPNow Q4 estimate for real GDP growth is 3.2%.

G10 FX performance was split. GBP and CHF were the top performers vs. the USD. Separately, AUD continued to lag, weighed on by mixed risk sentiment and weaker precious metals.

Sterling was the best performer in the aftermath of the UK Budget, despite newsflow being light on Thursday. GBP/USD climbed to around 1.3368 at the time of writing, paring the majority of WTD losses.

EUR was slightly firmer against the buck following the ECB's decision to hold rates as expected. It was soft heading into the meeting, after the ECB confirmed President Lagarde will step down on February 7th, 2027. Initial EUR weakness was seen on the statement and decision before reversing when President Lagarde said the early stages of the pricing chain point to upward pressures, lifting EUR/USD from 1.1125 to 1.1137. A further hawkish move followed when she said the situation could have warranted a hike, adding that today's decision does not indicate the ECB will not hike at its next meeting. Later, ECB source reports (via Bloomberg and Reuters) indicated that policymakers will raise rates at the December meeting. EUR/USD now trades around 1.1168.

USD/JPY is in focus ahead of the BoJ rate decision overnight, where rates are expected to remain at 1.25%. Tokyo CPI is also due in overnight trade.