Forex News

Kit Juckes at Societe Generale highlights Japanese Yen outperformance in G10 as markets anticipate further USD/JPY intervention. He argues that strong intervention expectations are driving reluctance to be short Yen, with EUR/JPY likely sold on rallies. However, he cautions that another spike in Oil prices could quickly reverse recent improvements in risk sentiment, keeping overall caution warranted.

Market wary of fresh action

"The main movers are GBP (stronger after the GDP data), JPY (as markets anticipate further intervention to support the currency), and AUD (weaker following the RBA meeting, particularly against NZD)."

"With a strong market perception that further USD/JPY intervention is likely in the near future, EUR/JPY is also likely to be sold on any rally today."

"The yen has been the strongest of the G10 currencies this month, and the market's reluctance to be caught out by intervention is clearly having an impact."

"Another spike in oil prices could easily reverse the recent improvement in risk sentiment, however, and caution still seems warranted."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

MUFG’s Lee Hardman highlights that European Central Bank (ECB) President Lagarde has pushed back against expectations for another back-to-back ECB rate hike, stressing higher long-term yields and the need for a measured response.

Lagarde tempers October hike hopes

"Earlier this week President Lagarde pushed back against expectations for the ECB to deliver another back-to-back hike next month."

"Furthermore, with second-round effects so far absent, it means that the ECB should continue to adopt a “measured response as appropriate to keep inflation in check”."

"The comments have dampened expectations for another ECB hike as soon as next month."

"Inflation in the euro-zone would need to surprise meaningfully to the upside in September to refuel October rate hike speculation."

"The paring back of ECB rate hike expectations has contributed to euro weakness this week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Societe Generale’s Kit Juckes notes a softer Dollar as Oil and bond yields edge lower and equities firm, with month-end flows likely in play. He highlights favourable conditions for a Dollar correction but warns that if EUR/USD cannot reclaim at least 1.14, the move will be seen as another opportunity to sell Euro, reinforcing negative sentiment from softer European data.

Key level caps Euro rebound

"If EUR/USD fails to move back above 1.14, at a minimum, this rebound will likely be widely viewed as another opportunity to sell the euro."

"Relative interest-rate differentials continue to move in the dollar's favour, while markets still price in three ECB rate hikes before the middle of next year."

"Is there really enough growth in the Eurozone to justify that?"

"It feels like an overreaction to a temporary inflation shock, albeit one that may persist as long as the energy crisis continues."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Deutsche Bank’s Jim Reid and team highlight a sharp intraday reversal in Brent Oil, with front-month prices dropping even as longer-dated contracts grind higher. Saudi supply normalization and a final US Strategic Petroleum Reserve release weighed on spot Brent, while December 2027 futures hit new highs, suggesting markets still price prolonged disruption despite near-term relief.

Spot weakness but curve stays firm

"At the European open, it looked like we were set for another day of gains, with Brent crude initially rising to $107/bbl. However, several headlines contributed to the pullback, including a Reuters report that Saudi Arabia had resumed oil loadings from the port of Yanbu."

"Meanwhile, the US announced that it will offer up to 40m barrels from its Strategic Petroleum Reserve, in what would be its last drawdown in the coordinated global release of oil announced earlier in the year. So that helped oil prices stage a decent intraday turnaround"

"Yet even with the pullback in oil and gas prices, investors struggled to get too excited. There are still no obvious signs of progress towards a deal, and we actually saw longer-dated Brent futures move up once again, with the December 2027 future up another +0.65% yesterday, reaching a new high of $80.81/bbl. So for investors, they’re still pricing in a lengthier period of disruption, even as increased oil flows out of the Gulf have eased the near-term pressure."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

DBS Group Research economist Eugene Leow assesses USD Rates ahead of the October FOMC meeting, noting investors see a near-even chance of a back-to-back Fed hike.

FOMC odds hinge on NFP data

"October’s FOMC meeting is treated as live with investors betting on a 47% chance of a back-to-back Fed hike. This week’s nonfarm payrolls (consensus: 90k) could well tilt the odds more decisively in either direction."

"More indicators (consistently low jobless claims and lower unemployment rates) are now showing labour market improvement compared to six months ago and this is broadly consistent with the firm PMI numbers that we saw last week."

"Our breakdown indicates that US yields are dragged up by a range of factors, most dominantly by higher Fed hike expectations and a moderate rise in inflation expectations."

"We also note the reaction of the UST curve in response to President of the NY Fed, John Williams, pushback on a back-to-back Fed hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Societe Generale’s FX team reports USD/JPY trading between 156.38 and 157.52 overnight, with the pair mildly offered on dovish New York Federal Reserve President John Williams comments and fiscal half‑end repatriation flows.

Dollar/Yen softens on US rate repricing

"USD/JPY: 156.38 - 157.52 overnight range."

"Spot mildly offered on Williams’ comments and fiscal half-end repatriation flow."

"Support 155, resistance 158.20."

"Option strike at 157.00 ($1.4bn)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Lee Hardman at MUFG reports the Pound is consolidating near year-to-date lows against the Dollar despite resilient UK growth, with Q1 and Q2 GDP both revised higher and BoE staff upgrading Q3 forecasts. Hawkish comments from Bank of England (BoE) officials support expectations for rate hikes, while Prime Minister Andy Burnham’s openness to closer EU ties raises the prospect of a future reverse-Brexit trade for the Pound.

BoE hawks and EU re-entry debate

"The pound has been consolidating at close to year-to-date lows against the US dollar this week at just above the 1.3200-level."

"They have raised their forecast for growth in Q3 to 0.4% up from their previous projection of 0.1% set back in July."

"Stronger growth will encourage the BoE to tighten policy soon if higher energy prices conte to prove more persistent."

"He judges that risks to the inflation outlook are “more titled to the upside”."

"It opens up the possibility for a potential reverse-Brexit trade for the pound in the future."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)