Headlines:
- Dollar slumps as yields retreat towards the end of the week
- Equities keep the faith ahead of US trading
- ECB's Vasle: We're probably done with rate hikes
- BOJ to conduct unscheduled bond buying operation to tamp down rates
- Eurozone September preliminary CPI +4.3% vs +4.5% y/y expected
- France September preliminary CPI +4.9% vs +5.1% y/y expected
- Germany August retail sales -1.2% vs +0.5% m/m expected
- Germany August import price index +0.4% vs +0.5% m/m expected
- Germany September unemployment change 10k vs 15k expected
- UK August mortgage approvals 45.35k vs 45.00k expected
- UK Q2 final GDP +0.2% vs +0.2% q/q prelim
- UK finance minister Hunt says GDP data once again proves the doubters wrong
- Switzerland September KOF leading indicator index 95.9 vs 90.5 expected
Markets:
- AUD and NZD lead, USD lags on the day
- European equities higher; S&P 500 futures up 0.3%
- US 10-year yields down 2.6 bps to 4.571%
- Gold up 0.1% to $1,867.19
- WTI crude up 1.1% to $92.69
- Bitcoin down 0.4% to $26,992
There was plenty of data releases to work through in European trading but the crux of it is that Eurozone inflation did ease to its lowest in two years, allowing some wiggle room for the ECB to work with - at least on paper. The drop is largely led by a steep decline in German price pressures, which owes much to base effects unfortunately as pointed out here.
Besides that, UK Q2 GDP was confirmed to show a slight marginal growth although the year-on-year reading did surprise higher but that doesn't distract from the ongoing worries in Q3 and heading into Q4.
The dollar was weaker throughout the session as yesterday's retreat continues today amid lower bond yields. The retreat in yields is also helping out broader market sentiment as risk trades are pushing higher, with equities looking to salvage the week and turn losses into gains before the weekend.
EUR/USD moved up to 1.0600 and is holding just below that, with large option expiries in play at the figure level. Adding to that, USD/JPY did see a dip from 149.40 to 148.52 before finding support from its 200-hour moving average and then now holding at 149.20 on the day. There are also large expiries at 149.00 in play for the pair.
But amid the better risk mood, it is the commodity currencies that are running away with things as we see AUD/USD run up by 1% to test 0.6500 once again and USD/CAD dropping by 0.5% to 1.3420. The latter is angling towards its 100-day moving average at 1.3400 once again, which was what kept the downside move earlier this month at bay.
In the equities space, US futures are holding higher alongside European indices as they look to close out the week by turning the rough losses on Tuesday and Wednesday into gains before all is said and done.
But how much all of this can be chalked up to month-end and quarter-end flows remains to be seen.
