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TSMC Q3 earnings beat forecast with AI chip demand driving growth

Taiwan Semiconductor Manufacturing Co. (TSMC), a key supplier to Nvidia and Apple, posted a 54% increase in Q3 net profit, surpassing expectations as surging demand for artificial intelligence (AI) chips offset weakness in the mobile industry.

The chip giant reported net profit for the September quarter of NT$325.3 billion ($10.1 billion), exceeding analysts’ average estimate of NT$299.3 billion.

The boost in earnings followed a 39% rise in revenue during the same period.

AI chips offset mobile market slump

TSMC’s performance reflects the growing importance of AI infrastructure.

As companies like Microsoft and Amazon ramp up spending on AI, the demand for advanced chips has surged, helping TSMC weather sluggishness in traditional markets like mobile and automotive sectors.

The increased demand has also bolstered TSMC’s partnerships with Nvidia and Apple, whose AI-related products and services have driven strong chip orders.

Despite concerns about slowing fabrication capacity growth, TSMC’s 2- and 3-nanometer chip technologies have attracted significant interest from companies including Nvidia, AMD, and Qualcomm.

This strong pipeline of orders has allowed TSMC to maintain a positive revenue outlook.

Stock performance and market reaction

TSMC’s shares have surged more than 70% this year, outperforming many of Asia’s major tech companies.

The growth mirrors investor confidence in the AI theme, with US retail investors actively trading TSMC’s American depositary receipts (ADRs). As of early trading, TSMC’s ADRs rose 4.5% on Robinhood’s platform.

Meanwhile, shares of Japanese chip equipment makers like Lasertec Corp. pared early losses after TSMC’s earnings announcement.

However, investors remain cautious following ASML Holding NV’s recent report, which revealed weaker-than-expected bookings due to slower recovery in the mobile and automotive sectors.

TSMC has eyes on international expansion

TSMC’s strategy of international expansion also supports its positive outlook.

The company is pursuing new plant construction in Japan, Arizona, and Germany, with plans to expand further into Europe, focusing on the growing AI chip market.

While AI spending continues to be a bright spot for TSMC, some investors have expressed concerns about its sustainability.

Analysts are questioning whether tech giants like Meta and Alphabet will maintain their high levels of investment in AI chips without a groundbreaking application to justify the spending.

Despite these concerns, TSMC remains focused on strengthening its production capabilities and capitalizing on AI-driven opportunities.

The company’s leadership in advanced semiconductor technologies and packaging solutions positions it well to meet the needs of future AI applications.

TSMC’s better-than-expected quarterly performance underscores the company’s ability to navigate shifting market dynamics by leveraging AI-driven demand.

With international expansion underway and cutting-edge technology leading the way, TSMC appears well-positioned for continued growth, even as the broader semiconductor market faces uncertainties.

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NuScale stock forecast: promising, but too many red flags

NuScale Power (SMR) stock price has gone vertical in the past few days, helped by the ongoing nuclear energy recovery. It has risen in the past six consecutive weeks, reaching a record high of $19.32, giving its market valuation to over $3.40 billion.

Other nuclear energy-related stocks have surged. Oklo, the Sam Bankman-linked company has jumped by over 40% this week after inking a deal with Google, one of the biggest companies in the tech sector. Its stock has jumped by over 200% from its lowest point this year. 

Similarly, the Sprott Uranium Trust, which tracks the price of uranium, has jumped by over 23% from its lowest level in August. The Global X Uranium ETF (URA) ETF has risen by over 30% in the last twelve months and by 27% in the last 30 days.

NuScale and modular nuclear energy

The nuclear energy industry is seeing a strong comeback as countries continue their transition from fossil energy to clean energy.

Many analysts believe that it is one of the cleanest and most reliable energy sources in the industry. 

Nuclear is better than solar, which is only effective when the sun is shining. Wind also works when the wind is blowing. 

Nuclear, on the other hand, generates power throughout, provided that there is enough uranium. 

A key challenge for nuclear energy is that many large plants have attracted some safety concerns. 

Therefore, the biggest trend in the industry is in the small modular nuclear reactors (SMR), which are small reactors that can be assembled locally. For example, a factory can contract the installation of such a reactor, which will help it in the transition process.

A key area that could spur this growth is in the data center industry, which is seeing robust demand because of the rising AI demand.

The industry has attracted several companies in the sector. Rolls-Royce Holdings, the giant British company, has moved to the industry and is working to deploy its plants in the UK.

NuScale is another top American company that aims to become a big player in the sector. It has developed the NuScale Power Module, which can generate about 77 MWe. 

The company has also created the VOYGR power plant, which has a capacity of up to 12 power modules, bringing in 924 MWe. 

Analysts believe that these modular plants will continue doing well as the energy sector improves. A recent study established that global power consumption will rise by 191% between 2020 and 2040.

Cash burning machine

The challenge for investing in NuScale is that it is a cash-incinerating company for now. It has already burnt over $2 billion since 2007 when it started working on the technology. 

It raised these mostly from Fluor Corporation, a company that focuses on the engineering and construction sector. 

The company also raised some of the cash when it went public through a SPAC merger deal with Spring Valley. It has also raised money from the Department of Energy. 

NuScale Power’s losses have also been growing in the past few years. According to SeekingAlpha, it had a net loss of over $82 million in the trailing twelve months (TTM). Its total loss in the past five years stood at over $376 million. 

The challenge, however, is that NuScale has been a highly dilutive company in the past few years. According to TradingView, the number of outstanding shares rose from 23 million in 2022 to over 92 million today. This means that early investors have been diluted by over 300% in this period.

Dilution is an important concept that reduces the stake of these investors. It also reduces the amount of money that these investors make per share in the future.

This trend will continue since the company ended the last quarter with $136 million in cash. While this is a big amount, the company also had a net loss of $74.4 million during the quarter. 

Also, there are signs that some insiders are selling the stock. Data by Barchart shows that insiders have sold 424k shares in the last three months and 522,648 in the last 12 months.

NuScale stock price analysis

SMR chart by TradingView

The daily chart shows that the SMR share price has been in a strong bull run in the past few months. It recently crossed the important resistance point at $16.94, its highest point in July this year.

The stock has moved above the 50-day and 200-day Exponential Moving Averages (EMA). Also, the MACD and the Relative Strength Index (RSI) have moved to the overbought level.

Therefore, I believe that the stock will retreat in the coming days or weeks as the hype surrounding nuclear power fades. If this happens, the next point to watch will be at $16.9, its highest swing on July 15. The key date to watch will be on November 7 when the company publishes its financial results.

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Uber reportedly explored buying Expedia: here’s why it could be an undervalued gem for investors

After a challenging year, Expedia Group is showing signs of recovery that could make it an appealing choice for investors, with added momentum from recent speculation that Uber Technologies is exploring a potential acquisition of the online travel giant.

With travel demand stabilizing post-pandemic and strategic shifts under new leadership, the company’s potential is starting to look much brighter.

The company has endured a rollercoaster year, with its stock tumbling after the departure of CEO Peter Kern and disappointing quarterly results earlier in the year.

Kern, who had successfully guided the company through the pandemic, left amid growing investor impatience.

His successor, Ariane Gorin, is now leading a turnaround, focusing on boosting market share for Expedia’s core brands—Expedia, Hotels.com, and VRBO.

In a report by Barrons, senior analyst Naveen Jayasundaram at ClearBridge Investments said,

“Expedia is a business in the midst of a turnaround. There are early signs of progress.”

Uber’s interest fuels optimism for Expedia’s future

Reports from the Financial Times suggest that Uber has explored a potential acquisition of Expedia, which has drawn further attention to the stock’s potential.

Expedia shares jumped 7.6% in after-hours trading after the report came out.

Uber’s CEO, Dara Khosrowshahi, previously led Expedia and remains on its board.

An acquisition could create synergies between Uber’s global transportation network and Expedia’s travel booking services, offering a more comprehensive travel solution for customers.

While no formal deal has been confirmed, Uber’s interest speaks volumes about the value proposition that Expedia represents.

Investors see this as a sign that the company’s assets and operational platform are increasingly attractive to major players in the travel and tech industries.

Travel demand stabilizes as Expedia eyes market growth

Despite fluctuations in the travel market post-pandemic, global travel demand remains robust.

Domestic and international air traffic has returned to 2019 levels, and cruise bookings are set to exceed pre-pandemic figures by nearly five million travelers in 2024.

Expedia, as one of the largest online travel agencies in the world, stands to benefit from this sustained demand.

Expedia’s market dynamics have also shifted as consumer preferences evolve.

Today’s travelers, especially new users unfamiliar with traditional booking platforms, are more likely to rely on online travel agents (OTAs) like Expedia for hotel and airfare deals.

Christopher Conway, senior portfolio manager at GYL Financial Synergies said in the report,

“The more fragmented the industry is, the harder it’s going to be for [competitors], even Google.”

While some bears argue that hotels may resist paying commissions to OTAs in the same way airlines have, the hotel industry remains fragmented, with many properties owned by smaller operators.

This limits the potential for a large-scale rebellion against platforms like Expedia and Booking Holdings, which together control roughly 42% of global travel bookings, according to travel industry firm Skift.

Source: Barron’s

Expedia’s valuation: Undervalued and ready for growth

Expedia’s stock is trading at attractive valuations, making it an appealing option for value-focused investors.

The stock is priced at just 11 times forward earnings, a significant discount compared to its main competitor Booking Holdings, which trades at 22 times forward earnings.

Dan Ahrens, managing director at AdvisorShares, refers to Expedia as a “blue-chip travel stock” that’s simply too cheap at current levels.

Jay Aston Jr., a portfolio manager at Neuberger Berman, echoes this sentiment, noting that “Booking does a good job, but Expedia has a pretty fantastic platform.”

He also highlights that Expedia’s unified platform, streamlined during the pandemic, is now generating significant cash flow.

The company posted $1.3 billion in free cash flow in the most recent quarter, a 42% increase from the previous year.

Aston adds,

A more unified platform will allow Expedia to generate significantly more meaningful cash flow, and there’s a lot more operating leverage to come.

Earnings growth and a bright future under new leadership

Expedia’s financial outlook appears strong, with analysts predicting a 21.5% increase in earnings per share this year, rising to $11.78, and an additional 20% growth in 2025 to $14.18.

Revenue is expected to grow by approximately 7% in both years, driven in part by the company’s home rental service, VRBO, which rebounded in the second quarter thanks to the launch of the One Key loyalty program.

Additionally, Expedia’s business-to-business (B2B) division, which allows other travel companies to tap into Expedia’s inventory, has also been a growth driver.

This part of the business, combined with other strategic initiatives, positions Expedia for continued success.

The company will report its third-quarter results on November 7, giving investors another opportunity to assess the effectiveness of its new leadership and strategy.

Randy Hare, director of equity research at Huntington National Bank, believes Expedia is well-positioned for growth, saying,

Expedia is probably interesting here, relative to Booking, since the valuation is more attractive—we like that. Their estimates seem doable…we could see decent growth and upward movement.

With analysts continuing to revise their earnings estimates upwards, and the company poised for further growth under the leadership of CEO Ariane Gorin, Expedia may just be the travel stock investors need to keep on their radar.

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Can Horizon Robotics revitalize Hong Kong’s IPO market with its $696 million listing?

Horizon Robotics, a prominent player in the realm of autonomous driving technology, has announced its intention to secure up to $696 million through an initial public offering (IPO) in Hong Kong.

This move comes as the city’s capital markets begin to exhibit signs of revitalization following a prolonged period of inactivity lasting nearly two years.

According to the company’s regulatory filings, Horizon Robotics plans to offer 1.36 billion shares, with pricing set between HK$3.73 and HK$3.99 ($0.51) each.

Should this IPO succeed, it will represent the largest public listing in Hong Kong for 2024, surpassing the anticipated $650 million IPO from China Resources Beverage, which commenced its book-building process earlier this week.

Prior to these developments, the Hong Kong IPO market had experienced a significant downturn, reaching multi-year lows as Chinese regulators maintained a tight grip on approvals for mainland companies seeking to raise funds outside of China.

In a positive sign for Horizon Robotics, cornerstone investors have already committed to purchasing $219.8 million worth of shares.

Notable contributions include bids of $50 million each from Alisoft China and Baidu, underscoring strong interest from major players in the technology sector.

Specializing in the production of advanced driver assistance systems and autonomous driving solutions, Horizon Robotics caters to the growing demand for innovative passenger vehicle technology within China.

The company also counts Volkswagen among its stakeholders.

The IPO process is set to finalize its share pricing on October 21, with trading expected to commence on the Hong Kong Stock Exchange on October 24.

In its filings, Horizon Robotics detailed plans to allocate 70% of the funds raised toward research and development over the next five years, while an additional 10% will be directed to sales and marketing initiatives.

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Will Hong Kong’s liquor tax cut revive its nightlife and attract tourists?

In a strategic move to reinvigorate its nightlife and dining scene, Hong Kong’s Chief Executive John Lee announced a significant reduction in liquor taxes on Wednesday.

This initiative aims to restore the city’s standing as a vibrant travel destination amidst growing competition from regional counterparts like Singapore and Japan.

Following the implementation of a national security law mandated by Beijing, Lee now faces the daunting task of enhancing Hong Kong’s economic competitiveness.

The Covid-19 pandemic has reshaped local lifestyles, prompting many residents to seek weekend entertainment in mainland China, where prices are lower and options are more diverse.

Consequently, the local demand for nightlife experiences has diminished, with fewer mainland visitors spending money in the city compared to previous years.

The impact of these changes is evident in the city’s popular shopping districts, where vacant storefronts have become commonplace. Preliminary data indicates that bar revenues plummeted approximately 28% in the first half of 2024 compared to the same period in 2019.

In his annual policy address, Lee announced a new duty structure for liquor.

Effective immediately, the tax on imported liquor priced over 200 Hong Kong dollars (approximately $26) will be reduced from 100% to 10% for the portion exceeding that threshold.

This policy aims to bolster various sectors, including logistics, storage, tourism, and high-end dining.

Historically, the abolition of wine duties in 2008 led to an 80% increase in imports within a year, fostering the establishment of numerous wine-related businesses in the city.

Lee, who was appointed by Beijing after serving as the city’s security chief, introduced the controversial national security law in March.

Critics argue that this legislation threatens the civil liberties guaranteed to Hong Kong upon its return to Chinese sovereignty in 1997.

This law mirrors similar national measures enacted by Beijing in 2020 in response to extensive anti-government protests, resulting in the prosecution or exile of many prominent activists.

The Hong Kong government maintains that these security laws are essential for maintaining stability.

In light of the significant political changes, many middle-class families and young professionals have relocated to countries such as Britain, Canada, Taiwan, and the United States.

To attract affluent migrants, Lee has also modified a residency scheme that permits applicants to gain residency by investing at least 30 million Hong Kong dollars ($3.9 million) in specific assets.

As of Wednesday, home purchases valued at 50 million Hong Kong dollars ($6.4 million) or more will count for up to a third of the investment requirement.

Just hours before Lee’s address, a small group of activists from the League of Social Democrats staged a demonstration outside government headquarters, advocating for universal suffrage in chief executive elections and the establishment of a retirement pension scheme.

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Hong Kong eases mortgage rules to address property slump

Hong Kong has introduced new measures to alleviate its prolonged property market slump by easing mortgage rules.

The city will raise the loan-to-value (LTV) ratio for all residential properties to 70%, up from 60%, effectively reducing the required downpayment for homes valued at over HK$35 million ($4.5 million).

Chief Executive John Lee announced the changes in his policy address on Wednesday, noting that the LTV ratio for company-held properties will also be increased to 70%.

These new measures are aimed at stimulating the city’s sluggish property market, which has been under pressure from high borrowing costs, an oversupply of housing inventory, and a weakening economy.

The adjustments take effect immediately, according to a statement from the Hong Kong Monetary Authority (HKMA).

Eased mortgage rules in response to softening property market

In its statement, the HKMA cited the recent softening of the property market as a factor behind the decision to ease mortgage rules.

“There is room to further adjust,” the authority said, pointing to the downward trend in home prices over recent months.

The changes are expected to provide some relief to homebuyers who have struggled with high downpayment requirements amid the city’s ongoing economic challenges.

In addition to the mortgage rule adjustments, the government is expanding its New Capital Investment Entrant Scheme to include real estate investments.

Under the new regulations, investments in homes valued at HK$50 million or above will qualify for the scheme, with the amount of real estate investment counted toward the total capital investment capped at HK$10 million.

Positive market reaction, but limited long-term impact expected

Following the announcement of these measures, the Hang Seng Property Index, which tracks the performance of major real estate companies in the city, rose as much as 3.9%, outperforming the broader Hang Seng Index.

However, market analysts caution that the impact of these changes on the overall residential market will be limited.

Thomas Chak, head of capital markets and investment services at Colliers International, noted that while the expanded home investment policy may attract high-net-worth individuals to the city and boost luxury property transactions, it is unlikely to have a significant impact on the general housing market.

“The focus on high-end properties does not address the broader affordability issues faced by most residents,” Chak added.

Challenges remain despite easing measures

Hong Kong’s real estate market has been struggling in recent months, facing multiple headwinds, including high interest rates, weak economic growth, and a glut of unsold homes.

Even with a recent reduction in interest rates, the market has not experienced the rebound that many had hoped for.

Developers continue to price new projects modestly to absorb demand, but with used-home values falling below pre-rate cut levels, residential prices are expected to remain under pressure.

According to Bank of America Corp., the backlog of unsold residential properties in Hong Kong has reached a 20-year high.

Outlook for the property market

While the government’s latest measures may provide a temporary boost, long-term challenges persist.

The oversupply of housing, coupled with modest demand, suggests that residential prices will likely remain subdued in the near term.

Without significant economic recovery or further government intervention, the city’s property market may continue to face a bumpy road ahead.

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Tesla transfers $760 million in bitcoin: what’s next for Elon Musk’s crypto strategy?

Tesla, led by Elon Musk, has stirred speculation in the cryptocurrency world by transferring nearly all of its bitcoin holdings—valued at approximately $765 million—to unknown wallets.

This action raises questions about whether the electric vehicle manufacturer is planning to sell its bitcoin.

On Tuesday, wallets associated with Tesla moved more than 11,500 bitcoin, leaving only about $6.65 in its original wallets, according to data from crypto analytics firm Arkham Intelligence.

The wallets receiving the transferred bitcoin appear to be new and are not linked to any known cryptocurrency exchanges, which does not immediately suggest a plan to liquidate these assets.

Tesla ranks as the fourth-largest corporate holder of bitcoin among publicly traded companies in the US, following MicroStrategy and the bitcoin mining firms MARA Holdings and Riot Platforms.

The company first acquired $1.5 billion worth of bitcoin in February 2021, at one point owning as much as $2.5 billion.

However, in early 2022, Tesla sold off approximately 75% of its holdings at a loss, capitalizing on market highs in November 2021 when bitcoin reached an all-time price of about $69,000.

At the time of its significant sell-off, bitcoin was valued around $24,000.

In July 2022, when Arkham Intelligence launched its bitcoin wallet tracking feature, Tesla’s remaining holdings were reported to consist of roughly 11,509 bitcoin, worth around $770 million.

Despite previously announcing intentions to accept bitcoin as payment for its vehicles, Tesla retracted this plan shortly after due to concerns regarding the environmental impact of bitcoin mining.

Musk has expressed a complex relationship with bitcoin, stating in a July YouTube interview that while he sees merit in bitcoin and other cryptocurrencies, his primary affection lies with Dogecoin (DOGE).

He has suggested that Tesla would reconsider accepting bitcoin for car purchases if a majority of bitcoin mining transitioned to renewable energy sources; however, the company has yet to resume bitcoin payments.

As the situation unfolds, the transfer of Tesla’s bitcoin has drawn considerable attention and analysis, leaving investors and cryptocurrency enthusiasts pondering the implications of Musk’s latest moves in the volatile crypto market.

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New Zealand dollar falls as rate cut bets rise amid China concerns

The New Zealand dollar has dropped to its lowest value since August, driven by increased expectations of interest rate cuts in the country and growing apprehension regarding economic conditions in China.

On Wednesday, the kiwi fell by as much as 0.7% to 60.4 US cents, making it the worst-performing currency among developed markets this month.

This decline followed a report indicating a significant decrease in the annual inflation rate for the third quarter, which heightened speculation that the Reserve Bank of New Zealand (RBNZ) may adopt a more aggressive approach to easing monetary policy after recently implementing a half-percentage-point rate cut.

The currency’s decline is compounded by waning investor confidence in China, New Zealand’s primary trading partner.

The Chinese yuan, a key player in the regional foreign exchange market, also depreciated alongside mainland stocks this week, as Beijing’s fiscal stimulus measures failed to inspire investor confidence in the country’s economic recovery.

Imre Speizer, a strategist at Westpac Banking Corp in Auckland, told Bloomberg that the kiwi could dip below 60 US cents in the coming days due to widening interest rate differentials.

He indicated that if the RBNZ were to accelerate its rate cuts, the kiwi might even fall beneath 59 US cents.

To date, the kiwi has experienced a decline of over 4% this month, surpassing losses in all other Group-of-10 currencies.

The RBNZ is grappling with the challenge of rejuvenating an economy facing a potential second recession within two years, acknowledging that its previous tight monetary policy has negatively impacted economic activity.

In its latest meeting, the RBNZ accelerated the pace of rate cuts in response to rising unemployment, which has reached its highest level in over three years, alongside a prolonged downturn in house prices.

Recent data revealed that New Zealand’s annual inflation rate slowed to 2.2% in the third quarter, falling within the RBNZ’s target band for the first time in more than three years.

This prompted traders to briefly price in a greater than 40% likelihood that the central bank would implement a 75 basis point cut at its upcoming meeting on November 27, according to Bloomberg data.

In contrast, Bloomberg reported that traders have reduced expectations for a further half-percentage-point cut by the Federal Reserve, as the US economy continues to demonstrate surprising resilience.

This development makes the kiwi less attractive compared to the dollar, as the yield advantage over the greenback narrows.

Further undermining market confidence, the absence of a robust and detailed fiscal stimulus plan from China has raised concerns about the outlook for the world’s second-largest economy.

A slowdown in China could have repercussions for New Zealand, which is a significant exporter of consumer goods, particularly dairy products, to the Chinese market, according to Stats NZ data.

As discussions about a potential 75 basis point cut in New Zealand intensify, David Croy, a rates strategist at ANZ Group Holdings Ltd, told Bloomberg that the market anticipates the RBNZ will be proactive and unafraid to make bold moves.

He cautioned that amid speculation about a slower easing pace from the Fed, this scenario poses additional downside risks for the kiwi.

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EUR/GBP and EUR/USD forecast ahead of ECB decision

The EUR/USD and EUR/GBP exchange rates continued their downward trend ahead of the important European Central Bank (ECB) decision and inflation report. The EUR/GBP pair fell to 0.8330, its lowest point since Oct. 3, while the EUR/USD plunged to the two-month low of 1.0890. 

ECB interest rate decision

The euro has weakened drastically against other currencies like the US dollar, Swiss franc, and the British pound as the bloc’s economic deterioration continued.

Reports released this week showed that inflation in key countries like France and Spain dropped below the ECB’s target of 2.0% in September.

In Sweden, the headline Consumer Price Index (CPI) fell from 1.9% in August to 1.6% in September. Similarly, in France and Spain, the headline figures dropped from 1.8% to 1.1%, and from 2.3% to 1.5%.

Inflation in other European countries has moved below the 2% target. Analysts expect the CPI data to be released on Thursday will show that the bloc’s inflation fell to 1.8% in September.

The ECB has won its battle against inflation, which peaked at 10.6% in 2022. Therefore, it needs to ensure that the bloc does not move to a deflation, which may affect consumer spending as they wait for prices to keep falling.

There are signs that the bloc’s economy is not doing well as key countries struggle. In a recent report, German researchers said that the economy will shrink this year before crawling back in 2025.

Many large German companies are struggling. For example, Volkswagen, one of the country’s top employers said that it may start to close factories for the first time in decades. Other companies like ThyssenKrupp and BASF have started cutting jobs in the country.

There are also concerns about the bloc’s jobs environment as the economic slowdown continues. The unemployment rate remains at 6.4%, while wage growth has stalled in the past few months.

Therefore, analysts expect the ECB to continue cutting interest rates on Thursday. The base case is that it will slash rates by 0.25%, and maintain a dovish tone. These rate cuts will help it increase liquidity in the bloc and lead to more growth in the near term. 

UK inflation data ahead

The EUR/GBP exchange rate will react to the upcoming UK inflation data, scheduled for Wednesday.

Economists polled by Reuters expect the data to confirm that the UK inflation continued falling in September.

The headline CPI is expected to fall from 0.3% to 0.2%, and from 2.2% to 1.9% on a month-on-month and year-on-year basis.

Core inflation, which excludes the volatile food and energy prices, is expected to drop from 0.4% to 0.3% and from 3.6% to 3.4%. 

If these numbers are correct, they will mean that the Bank of England has also won its inflation battle.

As such, the bank will maintain its relatively dovish tone and possibly cut interest rates in the next meeting in November.

The BoE, under Andrew Bailey, has been fairly cautious when cutting rates such that it left them unchanged in the last meeting, which explains why the EUR to GBP pair has slumped.

EUR/GBP technical analysis

The EUR/GBP exchange rate has been in a strong downward trend this year. It peaked at 0.8765 in January and then fell to 0.8330 this week. Its attempts to rebound in September found a strong resistance at 0.8625. 

The pair has formed a descending channel pattern and moved below the 50-day and 100-day Weighted Moving Averages (WMA). 

Also, the MACD has moved below the zero line, while the Relative Strength Index (RSI) has crashed below the neutral point at 50.

Therefore, the path of the least resistance for the pair is bearish as the UK interest rates remain higher than those in the EU. A drop below the year-to-date low of 0.8312 will point to more drops in the near term.

EUR/USD forecast

The EUR/USD pair has also slumped because US interest rates remain higher than those in Europe. It has also slumped because of the rising hopes that Donald Trump will win the US election in November.

In an interview with Bloomberg on Tuesday, Trump reiterated his threat to impose more tariffs, opening door to more global tensions.

On the daily chart, the pair formed a double-top pattern at 1.1200, and recently moved below its neckline at 1.100.

It has also crashed below the key support at 1.0980, its highest level in March 2024. The pair has moved below the 50-day and 100-day WMA, while the MACD and the RSI have pointed downwards.

Therefore, the pair will likely continue falling as traders target the next key support at 1.0800, which connects the lowest levels since October 2023. This is an important level since it connects the lowest swings since August.

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USD, EUR, GBP, TRY:  Turkish lira comeback can’t be ruled out?

The Turkish lira has strengthened slightly in the past few weeks as the country’s economy has improved, helped by the robust tourism sector. The GBP/TRY exchange rate has retreated from the year-to-date high of 45.97 to 44.70. 

Similarly, the EUR/TRY pair has dropped from 38.57 to 37.30, while the USD/TRY rate has slipped slightly from 34.40 to 34.37.

Turkish economic growth

There are signs that the Turkish economy is doing well, helped by the robust tourism sector. Recent data shows that the country’s tourists rose by 15% in the second quarter, and the trend has continued. Tourist arrivals soared to a record high in July.

Tourists are taking advantage of Turkey’s historic and beautiful places and the weak local currency. 

A weaker currency makes it easy for foreigners to spend in the country. The challenge, however, is that many businesses in Turkey charge their customers in foreign currencies like the US dollar and the euro. 

The government hopes that the tourism sector will being in more money this year. Last year, the sector grew by 16.9%, bringing in over $54.3 billion, a substantial amount for a country with a GDP of almost $1 trillion. 

However, while the services sector is booming, the key concern is the manufacturing industry. This sector should be doing well because of the weaker local currency. Data released earlier this month showed that the manufacturing PMI dropped to 44.30 in September from a peak of 50.3 earlier this year. 

Meanwhile, there are signs that the inflation situation in the country is improving. Data by the statistics agency showed that the headline Consumer Price Index (CPI) dropped from 51.97% in September to 49.38% in October. It has been falling after peaking at 75% a few months ago.

Analysts expect that the trend will continue unless the central bank changes tune and starts cutting interest rates prematurely. The other risk is that service inflation may remain higher for longer.

Meanwhile, recent data showed that the country’s current account balance improved in August as the country recorded a $4.3 billion surplus. The closely watched 12-month rolling deficit has narrowed to about 0.9% of the GDP. It stood at $11.3 billion, the lowest reading in over two years.

CBRT interest rate decision

The next important catalyst for the USD/TRY, EUR/TRY, and GBP/TRY will be the Central Bank of the Republic of Turkey (CBRT) interest rate decision on Thursday.

Analysts, based on the previous guidance, expect the bank to maintain interest rates at 50%, where they have been in the past few months.

The bank will likely hint that rates will remain at an elevated level for a while until inflation shows that it is falling. 

Analysts expect that the CBRT may decide to cut rates at the December meeting or in early next year. The ideal situation is where the bank holds rates steady for longer, a move that will make the lira more attractive than it is today.

The current scenario favors the lira than other currencies like the euro and sterling because investing in Turkish assets gives a positive return. 

EUR/TRY analysis

The euro to TRY exchange rate will also react to the upcoming European Central Bank decision. Analysts expect that the bank will continue cutting interest rates to stimulate the economy.

That cut will lead to an improved carry trade opportunity. A carry trade happens when investors borrow a low-interest-rate currency to invest in a higher-yielding one.

On the daily chart, the EUR/TRY pair has formed a double–top chart pattern at 38.35. It has also moved below the neckline at 37.30, its lowest point on September 11. The EUR/TRY has crossed the 50-day moving average.

The pair has moved slightly below the 50-day moving average, while the MACD has pointed downwards. Therefore, the pair may continue falling as sellers target the key support at 36.

The GBP/TRY pair will replicate the euro’s performance, meaning that it could drop to the support at 44.

USD/TRY technical analysis

The USD/TRY exchange rate peaked at 34.30, where it has struggled to move below in the past few months. It has remained above the 50-day moving average.

Most importantly, the MACD and the Relative Strength Index have formed a bearish divergence chart pattern. 

Therefore, a combination of a strong top at 34.30 and the divergence patterns means that the USD/TRY pair may have a big bearish breakout. If this happens, the pair will likely drop and retest the crucial support level at 34. This view will be confirmed if the pair drops below the 50-day moving average at 33.87. It will become invalid if it crosses the key resistance level at 34.30.

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