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There’s no clear catalyst for the roughly 10 bps drop in yields from the highs yesterday. Perhaps month-end rebalancing flows are at play here? That’s definitely a consideration alongside the slew of US data for the week, which kicked off yesterday via the JOLTS job openings and consumer confidence data.

Coming up later, we’ll have the ADP employment change and Q3 advance GDP data to get through. And then tomorrow, there’s the PCE price index and weekly jobless claims. All that before the non-farm payrolls report on Friday.

Going back to yields, the 4.30% mark is a key threshold highlighted by Goldman Sachs here. So, perhaps that added some intrigue to the level in trading this week. But for now, yields are keeping above the 200-day moving average (blue line) still, seen at 4.183%. So, that’s one other key line in the sand to be mindful of.

I want to say that the fall in yields today have some part to do with month-end flows but we’ll only get a better sense of that come next week. And of course, depending on how the US data plays out in the days ahead.

But as yields are lower on the day, it is putting a stop to the recent dollar gains. USD/JPY especially is down 0.3% to 152.90 currently, with the antipodeans also sitting a little higher against the greenback now.

The pound is the main laggard on the day though but it owes to some nervous feels ahead of the UK budget announcement later. If the budget manages to avoid being fiscally irresponsible, that might trigger a relief rally for the quid. So, that’s something to look out for.

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

The post Ex-Dividend 31/10/2024 first appeared on IC Markets | Official Blog.

• Prior -12.9
• Economic confidence 95.6 vs 96.3 expected
• Prior 96.2; revised to 96.3
• Industrial confidence -13.0 vs -10.5 expected
• Prior -10.9; revised to -11.0
• Services confidence 7.1 vs 6.6 expected
• Prior 6.7; revised to 7.1

Slight delay in the release by the source. Euro area economic sentiment dips a little more in October, dropping to its lowest since April. It reaffirms a more negative outlook towards the economy as we look towards the final quarter of the year.

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

• Prior +0.2%

The beat here is most welcome but it doesn’t take away from the struggling outlook. Germany’s manufacturing sector remains in recession and the boost to France in Q3 is largely thanks to a one-off demand shot in the arm from the Olympics. That will keep the pressure on the ECB especially if there is no prospects for improvement in Q4.

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

Looking at the near-term chart, buyers are starting to exert more control as they hold the break above the 100 (red line) and 200-hour (blue line) moving averages. The high for the day clips 1.0859 and it comes after a beat in German Q3 GDP alongside higher state inflation readings.

But let’s take a step back, does that change the equation for the ECB?

I would say not so much. They moved as a precaution in October to not fall behind the curve. And unless the economy continues to surprise to the upside in the months ahead, they will still feel compelled to act again in December.

They’ve already preempted that by saying that the disinflation process will have bumps along the way, with higher price pressures slated for year-end. And we’re already seeing that from the Spanish and German inflation numbers for October.

So, they have that caveat to fall back on if they are to move by 25 bps again in December.

Going back to EUR/USD, the nudge higher now draws in large option expiries at 1.0850. So, keep that in mind as a potential area in limiting price action before US trading. Besides that, the daily chart also underscores another key level.

And that is the 200-day moving average (blue line) at 1.0868. Keep below that and sellers will continue to stay in control in the bigger picture.

As such, it is now over to the dollar side of the equation to really provide the next test for EUR/USD. And we won’t have to wait too long with the US ADP employment roulette potentially one to offer some impact. But otherwise, the key levels above are the ones in play for the time being.

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

• Prior -8.8

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

• Prior +0.2%

The Italian economy surprisingly stagnates in Q3 but the attention today is more on the beat from Germany here.

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

• Prior -0.1%

Surprise, surprise. The German economy manages to avoid a technical recession with Q3 GDP growth coming in better than anticipated. That is pushing up the euro slightly now, with EUR/USD up to 1.0850 from around 1.0830-40 earlier. It still doesn’t quite change the overall picture for the ECB in my view. But this will at least calm fears of the ECB needing to move by 50 bps in December at least.

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

The other state readings released around the same time:

• Brandenburg CPI +% vs +1.4% y/y prior
• Hesse CPI +1.8% vs +1.2% y/y prior
• Saxony CPI +% vs +2.4% y/y prior
• North Rhine Westphalia CPI +2.0% vs +1.5% y/y prior
• Baden Wuerttemberg CPI +2.1% vs +1.4% y/y prior

Just take note that the readings here are much higher than anticipated. And this is likely to see an upside consideration to the estimate for the national reading later. German annual inflation is expected to come in at 1.8% in October but looking at this, we might see it move to around 2.1% instead.

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

• Prior 17k
• Unemployment rate 6.1% vs 6.1% expected
• Prior 6.0%

German joblessness ticked higher this month with the unemployment rate also nudging up slightly. The labour office notes that “the autumn upturn in the labour market has largely failed to materialise this year”. This will continue to be a spot to watch going into next year as the German economy struggles remain.

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

• Prior +0.8%

It’s a beat on estimates and once again, the Spanish economy continues to show that it is definitely punching above its weight in contributing to the overall Eurozone performance. On an annual basis, Q3 GDP is seen expanding by 3.4% and beating expectations of a 3.0% reading.

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

• Eurostoxx -0.6%
• Germany DAX -0.5%
• France CAC 40 -0.8%
• UK FTSE -0.5%
• Spain IBEX -0.5%
• Italy FTSE MIB -0.7%

Some mixture of earnings releases are also in play but the overall mood in Europe is a more negative one, keeping with the selling from yesterday. The DAX is now under threat to erase its monthly advance as such. Looking at broader sentiment, it is a mixed one as well with US futures sitting a little higher.

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