Forexlive Americas FX news wrap: ECB members strike a more-dovish tone

• Goldman Sachs sees 4.30% in 10-year yields as a line in the sand for risk appetite
• ECB’s Lagarde: Can’t jump to conclusion that inflation target is a done deal
• ECB’s Holzmann: Disinflation is faster than expected
• ECB’s Rehn: Growth outlook has weakened and this could increase deflationary pressure
• ECB’s Villeroy: There is a risk of undershooting 2% target, especially if growth weak
• ECB’s Knot: Falling interest rates should ease debt burdens
• IMF boosts US growth forecasts, trims China and Germany
• US October Richmond Fed manufacturing composite index -14 vs -21 prior
• Canada September producer price index -0.6% vs -0.5% expected
• Israel attack on Iran “seems that it will be within days” – report
• BOE’s Greene: I tend to favor a gradualist approach to cutting rates
• ECB’s Nagel says a dot plot system is not desirable
• IMF’s Gourinchas: China’s stimulus measures announced by PBOC not sufficient to lift GDP
• ECB’s Centeno: Data will tell us if larger rate cuts are needed
• Bank of Canada expected to cut by 50 basis points and continue cuts to end-2025

Markets:

• Gold up $27 to $2747
• WTI crude up $1.68 to $72.09
• US 10-year yields up 2.8 bps to 4.21%
• S&P 500 flat
• AUD leads, JPY lags

The ECB rolled out the full roster of speakers on Tuesday and if there was a consistent theme it was increasing caution about rates and a stronger belief that the inflation target will be hit. There was no real talk of a 50 basis point cut but market pricing for it has crept up to 35% and they certainly validated that with an emphasis on disappointing growth. The euro tracked lower and edged below 1.08 late.

Overall, the moves in FX were limited to around 20 pips with slightly more in USD/JPY as Treasury yields made new monthly highs. US 10s marched up to a high of 4.22% before backing off slightly and USD/JPY rose as high as 151.19.

Cable dipped down to 1.2946 to match the October low before bouncing 30 pips. The market is trying to get its head around Bank of England policy thinking. Lane spoke today but didn’t touch on monetary policy and there are mixed messages about how aggressively they want to get rates lower.

Commodity currencies were generally higher with the help of a turnaround in stock markets and a 2% rallin oil prices. The Australian dollar led the way as the market continues to anticipate fiscal stimulus from China, in the next couple weeks though the size is far from certain.

The loonie made slight gains ahead of Wednesday’s highly-anticipated BOC rate decision (preview above).

Gold remains the star of the shows this week as it erased yesterday’s dip and rallied to a fresh record high. Every dip was bid today with a series of higher highs and growing enthusiasm. Bitcoin wasn’t able to join in the rally but finished only modestly lower.

This article was written by Adam Button at www.forexlive.com.