Inflation Surprise Doesn't Help the Aussie

Australian inflation surprised on the upside, reigniting expectations of another rate hike as early as November. However, the Aussie could not enjoy the buying momentum for long as the US dollar strengthened.

Sunset Market Commentary

After a disappointing performance over the previous two weeks, the dollar tries to build on yesterday’s PMI-driven rebound. DXY touched the 106.5 area, compared to a ST correction low at 105.36 yesterday. EUR/USD dropped further to currently trade near 1.0575.

USD/JPY Tiptoeing Just Shy of 150

Like an acrobat on a tightrope, the yen has been hovering within a whisker of the 150 level. This has continued for almost two weeks, with investors keeping peeled eyes on the yen, waiting for it to breach the symbolic 150 line. It remains unclear if 150 is a ‘line in the sand’ for the Bank of Japan, which tends to remain mum about exchange levels in order to dissuade speculation on the currency.

Canada: Sluggish Growth, Slowing Inflation, Softer Currency

The Bank of Canada (BoC) held its policy rate at 5.00% at its October announcement, and maintained a moderate tightening bias. However, we believe the BoC's interest rate pause will be an interest rate peak. Given we forecast slower growth and inflation than the central bank, we expect policy rate to hold steady for an extended period, before rate cuts begin in Q2-2024.

USD/JPY Pierces Through 150-level

The move accelerates again this morning as USD/JPY pierces through the 150-level, adding pressure on the Bank of Japan. The trade-weighted dollar currently changes hands around 106.75 compared to 106.25 yesterday morning. EUR/USD trades below 1.0550 from 1.06. German yields rose 3.1 bps (2-yr) to 7.3 bps (30-yr). Sterling underperformed other majors in yesterday’s climate, with EUR/GBP moving further away from the technical 0.87 pivot (currently 0.8730).

Euro Under Pressure ahead of ECB Meeting

It has been a long time coming, but barring a major surprise, the ECB will hold rates at today’s meeting. This would mark the first pause since the ECB began the current rate-tightening cycle in July 2022. The key deposit rate is currently at a record high of 4.0%.

Crypto Market Pretends to be a Safe Haven

The crypto market is holding its total capitalisation above $1.27 trillion despite a frightening sell-off in equities overnight. Bitcoin and other major altcoins are once again attempting to play the role of safe haven.

Euro Shaky Ahead of ECB Meeting

As far as markets are concerned, the European Central Bank (ECB) is expected to leave rates unchanged in October for the first time in over a year, amid signs of cooling inflation. Over the past few months, price pressures have eased in Europe, with the headline rate falling to 4.3% in September, which was the lowest since October 2021.

US: Economic Growth Clocked in at Robust 4.9% in Q3, More Than Double Q2's Rate of Expansion  

An absolute blockbuster reading for third quarter real GDP, with solid gains seen across nearly all components of spending. At this rate, even if the economy were to completely stall in the fourth quarter, economic growth would still expand by 2.3% this year – slightly stronger than last year's 1.9% and an equivalent rate of expansion to 2019 when interest rates were far lower.

U.S. Economy Defied Gravity in Q3 with 4.9% GDP Gain

Third quarter U.S. GDP remained exceptionally strong, accelerating to an annualized rate of 4.9%. That was also the fifth consecutive increase since Q2/22 and largest since Q4/21.