Articles

Headlines:

• Japanese yen still the only notable mover among major currencies so far today
• BOJ governor Ueda comments on phrasing of needing time to scrutinise market risks
• BOJ governor Ueda: Uncertainties surrounding Japan’s economy, prices remain high
• BOJ governor Ueda: Will pay attention to upside risks to prices from weak yen
• BOJ governor Ueda: It is possible that unforeseen negative effects could emerge with more rate hikes
• What is the distribution of forecasts for the US PCE report?
• Weekly update on interest rate expectations
• ECB’s Lagarde: Inflation goal is in sight
• ECB’s Panetta: Rates need to come down
• Eurozone October preliminary CPI +2.0% vs +1.9% y/y expected
• France October preliminary CPI +1.2% vs +1.1% y/y expected
• Italy October preliminary CPI +0.9% vs +1.0% y/y expected
• Germany September retail sales +1.2% vs -0.5% m/m expected
• Germany September import price index -0.4% vs -0.4% m/m expected
• US October Challenger layoffs 55.60k vs 72.82k prior

Markets:

• JPY leads, CAD lags on the day
• European equities lower; S&P 500 futures down 0.6%
• US 10-year yields up 1.6 bps to 4.280%
• Gold down 0.2% to $2,779.54
• WTI crude up 0.8% to $69.16
• Bitcoin down 0.9% to $72,214

The BOJ was in focus today and while the policy decision in itself wasn’t all too interesting, the yen reaction has been somewhat.

Going into BOJ governor Ueda’s press conference, USD/JPY settled a little lower around 152.80 but quickly took a dive during the event. Ueda did mention that they had previously felt the need to make known to markets that they need time to scrutinise the volatility back in August but says that they don’t have to do so now anymore.

Alongside a bit of a technical air pocket, it quickly sent USD/JPY down to 152.10 before keeping around 152.40-50 levels after. The pair has since recovered a bit more ground to 152.70 now, down just 0.5% on the day.

There wasn’t much else of note happening in the major currencies space, with the dollar largely keeping steadier but more muted against the rest of the field.

And that comes despite equities being pressured, with US futures sagging with big tech on the back foot. S&P 500 futures were down around 0.3% initially but fell off to around 0.8% losses during the session. That is making for a more negative take ahead of the Wall Street open later, with eyes on Amazon’s earnings next after the close today.

Month-end shenanigans may play a role in making it tough to read into the moves today. So, just keep that in mind. That will add to the mix alongside the PCE and jobless claims data from the US later. Not to mention, there’s arguably also some apprehension in market flows ahead of the US election next week.

This article was written by Justin Low at www.forexlive.com.

• Prior 72.82k

US-based employers announced 55,597 job cuts in October and that is a near 24% decrease from the number of layoffs announced in September. That said, it is up almost 51% compared to the October of 2023. From last month’s report, we already saw the number of layoffs year-to-date in 2024 surpassing the entire total for 2023. So, this continues with that trend and suggests softening in the labour market this year.

This article was written by Justin Low at www.forexlive.com.

Why it’s
important?

The ranges
of estimates are important in terms of market reaction because when the actual
data deviates from the expectations, it creates a surprise effect. Another
important input in market’s reaction is the distribution of forecasts.

In fact,
although we can have a range of estimates, most forecasts might be clustered on
the upper bound of the range, so even if the data comes out inside the range of
estimates but on the lower bound of the range, it can still create a surprise
effect.

Distribution
of forecasts for PCE

PCE Y/Y

• 2.2%
  (9%)
• 2.1%
  (66%) – consensus
• 2.0%
  (25%)

PCE M/M

• 0.2%
  (85%) – consensus
• 0.1%
  (15%)

Core PCE Y/Y

• 2.7%
  (19%)
• 2.6%
  (81%) – consensus

Core PCE M/M

• 0.3%
  (71%) – consensus
• 0.2%
  (29%)

Overall, I don’t think that the data this week matters that much as we have the US elections on Tuesday, but it could still move the market and add some more info to the bigger picture.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior +0.7%
• HICP +1.0% vs +0.8% y/y expected
• Prior +0.7%

This matches up to what we are seeing with Spain, Germany, and France this week. Headline prices are marked higher in October but this did not lead to much change in core prices as seen with the Eurozone release at the same time.

This article was written by Justin Low at www.forexlive.com.

• Prior 6.4%; revised to 6.3%

After the revision to August, the euro area jobless rate remained steady and is still keeping on the lower side for well over a year now. The economic slowdown has yet to materially impact the labour market and that’s something the ECB can look to for more flexibility, if need be.

This article was written by Justin Low at www.forexlive.com.

• Prior +1.7%
• Core CPI +2.7% vs +2.6% y/y expected
• Prior +2.7%

Headline annual inflation ticked higher as predicated by the individual country readings we got in the last two days. However, core annual inflation remained unchanged as it was in September, seen at 2.7%. That will give the ECB some confidence despite the higher headline numbers for the month. But again, this is just one month’s worth of numbers so let’s see how things shape up in November and December next.

This article was written by Justin Low at www.forexlive.com.

Here is the snapshot of dollar pairs so far in European morning trade:

Besides USD/JPY, other dollar pairs are not showing much appetite with light changes among the other major currencies. And that is despite the more negative risk flows we’re seeing in equities. S&P 500 futures are now down 0.8%, so that looks to be setting up for a softer end to October later in Wall Street. From earlier: US futures not impressed by big tech earnings so far

We might see major currencies pick up on that later in the day. But just be wary that month-end trading conditions are also a factor to consider. And that might make it tough to square up the moves in the sessions ahead. After some pushing and pulling, bond yields are now pulling back higher with 10-year US yields seen at 4.288%. So, there’s that as well.

Circling back to FX, USD/JPY is the main mover as it fell on BOJ governor Ueda’s remarks earlier. The follow through selling tried to firmly take out 152.00 but buyers are holding on for now. The hourly chart also shows some defense of the 200-hour moving average, keeping a more neutral near-term bias now:

Coming up, we have Eurozone inflation data for October at the top of the hour. But for broader markets, the attention turns back towards US data with the PCE and weekly jobless claims on the agenda today.

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx -0.7%
• Germany DAX -0.7%
• France CAC 40 -0.5%
• UK FTSE -0.6%
• Spain IBEX -0.4%
• Italy FTSE MIB -0.5%

It’s been a rough week for European stocks and the selling looks to continue into month-end. Just be wary that the CAC 40 index is now pipping back below its 100-week moving average for the first time since the first week of August. Looking elsewhere, US futures are also very much subdued. S&P 500 futures are down 0.8% with Nasdaq futures down 1.1% currently.

This article was written by Justin Low at www.forexlive.com.

• Prior +1.1%
• HICP +1.5% vs +1.5% y/y expected
• Prior +1.4%

This matches up with the slight upticks in Spain and Germany from yesterday as well. The good news at least here is that services inflation is seen easing further to 2.2%, down from 2.4% previously.

This article was written by Justin Low at www.forexlive.com.

• This is because Japan has not seen rate hikes in a very long time
• Next rate hike can happen when we become more confidence of realising our outlook
• If wage hikes are similar to this year, that will be a positive development
• But that doesn’t mean we will decide a rate hike only with that

This article was written by Justin Low at www.forexlive.com.

She’s still trying to thread the needle here but I reckon on the balance of things, the pound has taken to the budget quite well. It was a tough scenario as the currency had mostly expected negative takeaways from the budget. Tax hikes would’ve hit short-term growth and increased spending/borrowing would’ve upset the gilts market and raise debt concerns.

But as mentioned yesterday, she’s lucky enough that this is coming at a time when the BOE is cutting rates instead.

This article was written by Justin Low at www.forexlive.com.

• Prior +1.6%

This article was written by Justin Low at www.forexlive.com.