One of Amazon’s top executives defended the new, controversial five-day-per-week in-office policy on Oct 17, saying those who do not support it can leave for another company.

Speaking at an all-hands meeting for AWS, unit chief executive officer Matt Garman said nine out of 10 workers he has spoken with support the new policy, which takes effect in January, according to a transcript reviewed by Reuters.

Those who do not wish to work for Amazon in-office five days per week can quit, he suggested.

“If there are people who just don’t work well in that environment and don’t want to, that’s okay, there are other companies around,” said Mr Garman.

“By the way, I don’t mean that in a bad way,” he said, adding “we want to be in an environment where we’re working together.”

“When we want to really, really innovate on interesting products, I have not seen an ability for us to do that when we’re not in-person,” said Mr Garman.

The policy has upset many of Amazon’s employees who say it wastes time with additional commuting and the benefits of working from the office are not supported by independent data.

Amazon has been enforcing a three-day in-office policy, but CEO Andy Jassy said last month the retailer would move to five days to “invent, collaborate and be connected.”

Some employees who had not been previously compliant were told they were “voluntarily resigning” and were locked out of company systems.

Amazon, the world’s second-largest private employer behind Walmart, has taken a harder line on returning to office than many of its technology peers such as Google, Meta and Microsoft who have two- to three-day in-office policies.

“I’m actually quite excited about this change,” said Mr Garman. “I know not everyone is,” he said, noting it’s too hard to accomplish the company’s goals with only the mandatory current three days of in-office work.

Mr Garman said under the three-day policy, “we didn’t really accomplish anything, like we didn’t get to work together and learn from each other,” because people may be in offices on different days.

In particular, Mr Garman said the company’s leadership principles, which dictate how Amazon ought to operate, were difficult to follow with just a three-day-per-week requirement.

“You can’t internalise them by reading them on the website, you really have to experience them day-to-day,” he said.

One, “disagree and commit” – which is understood to mean that employees can express grievances but then should dive into a project as outlined by leaders – is not ideal for remote work, Mr Garman said.

“I don’t know if you guys have tried to disagree via a Chime call,” he said, referring to the company’s internal messaging and calling function. “It’s very hard.”

Source: Straitstimes

USD: Dollar rally has more to go

US retail sales came in strong yesterday, and the timing of their release (15 minutes after the European Central Bank cut) worked perfectly to favour another leg higher in the dollar. USD/JPY finally made the seemingly inevitable break above 150.0, but we would not be expecting a straight-lined appreciation in the pair from here as Japanese authorities may step up verbal intervention. Markets should be more attentive to currency comments than in previous JPY selloffs given the success of the latest round of Bank of Japan FX intervention.

That said, unless markets regain some confidence in Fed cuts, the dollar will hardly face downward corrections in the near term. The risk now is that markets might actually price out one cut in either November or December (currently 42bp priced in total) should core PCE and above all October jobs figures come in a bit hotter.

Still, that is not as big an upside risk for USD as the US election. We still think some de-risking into 5 November can lead to some defensive flows into the dollar, and that the likes of the Australian and New Zealand dollars are due another leg lower into the election. The antipodeans are highly exposed to tariffs on China, which may well overshadow any benefit from Beijing’s stimulus measure. Overnight we saw China’s 3Q growth numbers at 4.6% year-on-year vs the 4.5% expected. In the commodity FX space, we continue to expect outperformance by the Canadian dollar, also since we narrowly favour an out-of-consensus 25bp cut by the Bank of Canada next week.

Back to the US, the calendar is quite light today and only includes some housing data for September. We’ll be monitoring whether any of today’s Fed speakers (Raphael Bostic, Neel Kashkari and Christopher Waller) take an extra step to the hawkish side on the back of yesterday’s retail sales numbers. DXY might be due some small and short-lived corrections, but we can easily see it climb above 104.0-104.5 in the next couple of weeks.

EUR: Lagarde puts a cap on the euro

ECB President Christine Lagarde sounded a bit more dovish than usual at yesterday’s post-meeting press conference. She emphasised the ECB’s greater confidence in the disinflation path, and while she said the activity picture only influences policy decisions insofar as it affects inflation, the general perception is that the focus has started to shift from inflation to growth. As our ECB watcher, Carsten Brzeski, points out here the drop in September’s headline inflation was in line with the ECB’s own projections, so it must have been the grim PMIs that tilted the balance to the dovish side yesterday. Lagarde repeated at least twice that the ECB is data-dependent and not data-point dependent, but a dovish reaction to an activity survey would instead point to the latter.

If indeed the focus is now more on growth, we can probably conclude that the ECB will keep cutting, as the activity outlook will hardly improve much in the near term. Markets agree and are pricing in 100bp of easing in the next four meetings (December, January, March, April). That is probably the maximum the ECB can deliver, and there are risks of some hawkish repricing helping front-end euro rates around the turn of the year.

But with regards to the near-term picture, the euro is left weaker, with more limited room for a rebound as the two-year swap rate gap with the dollar is now at -140bp, the widest since May. This is consistent with EUR/USD trading below 1.080, and given the risks are skewed to a firmer USD into a closely contested US election, 1.070 is well within reach before month-end.

GBP: Cable can slip to 1.28

September's better-than-expected UK retail sales data, which comes on the heels of decent August growth, is another sign that the economy is still performing relatively solidly. The consumer is benefiting from strong real wage growth, though we don't expect the growth rates we saw in the first half of the year to be repeated in the second. Still, growth data is of secondary interest for the BoE right now. This week's surprise dip in services inflation is more important, suggesting back-to-back rate cuts are becoming more likely.

Sterling has proven to be a bit more resilient than we had thought after that sharp downward surprise in services inflation on Wednesday. Cable has hovered around the 1.30 mark, and so far failed to make another decisive move lower. Still, we think the balance of risks remains skewed to the downside.

Even with less than two Bank of England cuts priced in by year-end, the two-year swap rate gap between sterling and the dollar has now tightened to 19bp from 55bp at the start of October. The last time we saw that spread around these levels (early August) GBP/USD was trading at 1.28, and barring major US data downside surprises, we see no strong argument against a move to that level.

CEE: FX welcomes central bankers' hawkishness but rates remain under pressure

As expected, the Central Bank of Turkey (CBT) left rates unchanged at 50% and added a bit to its hawkish communication. The statement turned cautious as a result of increasing uncertainty surrounding the pace of inflation improvements. The CBT reiterated that its tight monetary stance would lead to a) a decline in the underlying trend of monthly inflation by moderating domestic demand, b) real appreciation in the Turkish lira, and c) an improvement in inflation expectations. We believe there could be room for a first rate cut in December, but it will, of course, depend on the October and November inflation numbers. On the positive side, the CBT seems to be aware of the situation and the risk of a mistake is diminishing, which should confirm the bulls in the TRY market.

In Hungary, the National Bank of Hungary's deputy governor reiterated that the pause in the rate-cutting cycle may be longer given the headwinds in the EM space. Although the market is pricing in a first rate cut only in January and around 50% for December, the headlines supported the currency and for a while, we got below 400 EUR/HUF. However, yesterday rates and bonds across the region came under pressure again due to higher core rates in the US, which later reduced some gains in FX as well. We'll hear more next week when the NBH is scheduled to meet. It's already almost certain that a rate cut is not on the table, but we could hear more details on how long the pause in the cutting cycle may be.

Source: Poundsterlinglive

In focus today

Swedish September LFS is expected to show a small increase in the unemployment rate to 8.4 % SA. That said, we will rather keep an eye on employment and hours worked which should recover after the summer lull.

Economic and market news

What happened overnight

In China, Q3 GDP grew 4.6% y/y in July-September, which is the slowest pace since early 2023, showcasing need for more support and undershooting Beijing’s target of 5%. The monthly batch of data showed stronger than expected industrial production at 5.4% y/y (cons: 4.5%) and retail sales at 3.2% y/y (cons: 2.5%). Moreover, the Central Bank of China initiated its two-stage funding schemes in which they are utilizing newly created monetary policy tools to pump USD 112.38bn into the stock market.

In Japan, the core inflation (CPI excl. fresh food) for September was slightly above expectations (2.3%) printing 2.4% y/y. The slowdown from last month’s figure of 2.8% was largely due to government intervention of temporary rollouts.

In the Middle East overnight, Hezbollah announced a ‘new and escalating phase’ in its confrontation with Israel, while Iran said the spirit of resistance would strengthen following Israel’s reported killing of Hamas leader Yahya Sinwar on Thursday. Sinwar, who became Hamas’ leader after Ismail Haniyeh’s assassination in July, was seen as the mastermind behind the 7 October attack on Israel.

What happened yesterday

In the euro area, as expected ECB cut rates for the third time this year to bring the deposit rate to 3.25%. The weakness in the incoming economic data since the last governing council meeting was acknowledged by Lagarde, and that data led to a further confidence on the inflation path being on track which led to the rate cut. Yesterday’s decision was unanimous. Markets traded mostly sideways through the press conference as no guidance of how aggressive, or potential end point of the cutting cycle was given. For more details, please see Flash: ECB Review – A rate cut – and awaiting more data, 17 October.

Prior to the ECB meeting, the final inflation data for September printed a 1.7% y/y confirming the low inflation momentum, driven by services, which supported the ECB’s assessment.

In the US, the September retail sales growth surprised to the topside. Control group sales grew by +0.7% m/m SA. However, the seasonal adjustment factor provided unusually strong lift to the monthly figures, and the y/y growth rate in non-seasonally adjusted terms declined to 2.7% (from 3.9%). The bottom line is that US private consumption remains on a solid, but still cooling trend. Markets have also paid close attention to the jobless claims data. Surprisingly, the number of weekly initial claims declined to 241k (from 260k) even though the data should now cover at least the initial impact from hurricane Milton.

In Norway, Norges Bank’s Ida Wolden Bache held a speech to the Centre for Monetary Economics (CME) BI in the Norwegian business school where she discussed the options that Norges Bank is considering when it comes to the liquidity regime shift starting in 2025 as the government will no longer sterilise the seignorage of Norges Bank by issuing bonds. The assumption has been that this will lead to a rise in reserves in the system (when the government spends money on the budget), but Bache opened the door for limiting the rise in the FX reserves as option number 2. Essentially this is a decision of whether the liabilities side or the asset side of the balance sheet should take the adjustment – and this could have a market impact. If they opt for an asset side control it would be positive for NOK FX and positive for FRA/Nowa. We therefore enter a tactical long

In Denmark, as expected the Central Bank followed ECB 1:1 and cut its policy interest rate by 25 bp to 2.85%.

In Turkey, the CBRT kept their key policy rate at 50% as expected by markets.

FI: Markets added to rate cut bets ahead of the December ECB meeting – now 30bp vs 25bp prior to the meeting – following Lagarde’s dovish remarks on the disinflationary process and a Bloomberg story suggesting that ECB officials see another cut at the next meeting as ‘highly likely’. 2Y German yields headed lower through the press conference, but the move reversed in the last part of the session with levels slightly higher by the close. Long-end rates rose across Europe and the US as US retail sales and claims data both came out stronger than expected. German ASW-spreads continued to grind lower with the Bund ASW-spread now trading just above 21bp.

FX: Industrial-sensitive currencies lead losses in yesterday’s session with a dovish twist to the ECB communication driving additional EUR losses. EUR/USD continues to trend lower while USD/JPY has breached the 150-mark on higher US yields. The NOK found some much needed support in the latter part of the session which also contributed to a rebound in NOK/SEK.

Source: AP

The European Central Bank cut interest rates again on Oct 17, upping the tempo at which it is lowering borrowing costs as inflation in the eurozone cools faster than expected.

The Frankfurt-based institution reduced rates by a quarter point, following a cut of the same size at its last meeting in September.

Oct 17’s move was the first time that the ECB has cut rates back to back since it started its cycle of easing rates in response to declining inflation.

After peaking at 4 per cent, the ECB’s benchmark deposit rate sits at 3.25 per cent following the latest cut.

The decision came after a late downwards revision to September’s inflation data in the euro zone on Oct 17.

Consumer prices in the bloc rose by 1.7 per cent year on year in September, according to the EU’s data agency Eurostat, 0.1 percentage points less than the initial estimate.

Before the change, September’s reading was already the first time in three years that inflation in the eurozone had dipped below the ECB’s two-per cent target.

The incoming data showed that the process of cooling consumer prices was “on track”, the ECB said in a statement.

“Inflation is expected to rise in the coming months, before declining to target in the course of next year,” the ECB said.

Slovenia meeting

ECB rate-setters met in Slovenia to discuss their next move, as they made one of their regular tours away from the institution’s headquarters in Frankfurt.

Oct 17’s decision was the third time that they have cut since rates reached their peak.

The bank cranked rates up higher and faster than ever before in response to soaring inflation in the wake of the Covid-19 pandemic and the Russian invasion of Ukraine.

But recent, lower-than-expected inflation figures have added to the sense among policymakers that consumer prices are back under control.

Weakness in the euro zone economy gave the ECB a further reason to lower borrowing costs and bring some relief to households and businesses.

“Recent downside surprises in indicators of economic activity” supported confidence that inflation was heading durably towards two per cent, the ECB said.

The move to follow up September’s cut with another reduction suggested that the ECB was “much more concerned about the euro zone’s growth outlook” than before, ING analyst Carsten Brzeski said.

With that came the risk of “inflation undershooting the target”, Mr Brzeski said.

“It’s hard to see how today’s rate cut cannot be seen as a signal that the ECB is now in a hurry to bring interest rates down,” he said.

‘Data-dependant’

The ECB itself said it would “continue to follow a data-dependent and meeting-by-meeting approach”. The bank was not “pre-committing to a particular rate path”, it added.

ECB president Christine Lagarde was due to speak following the decisions, with analysts eager to parse through her comments in Slovenia for an indication of the thinking among ECB policymakers about the future path of rates.

She was unlikely to “correct market expectations for another 25 basis point move” at the ECB’s next meeting in December, Berenberg bank analyst Holger Schmieding said.

Going into 2025, observers expected the ECB to keep lowering interest rates at a steady pace with a string of cuts.

The ECB might even provide a hint that it would pursue further reductions “until they reach a neutral rate of two percent to 2.5 percent by the middle of next year”, said director of economic studies Eric Dor at the IESEG business school in France.

Source: Straitstimes