North American Summary and Highlights 5 October
Overview - The EUR was under pressure due to French fiscal concerns but saw some recovery in North America.
North American session
The USD saw little movement in North America remaining slightly up on the day. Equities and UST yields were however higher and oil slightly softer. September’s ISM services index of 54.9 from 55.4 was slightly lower than ex]ec5ed but prices paid at 74.0 from 72.6 was the highest since July 2022.
EUR/USD stabilized near 1.12 after having earlier broken below. EUR/GBP and EUR/CHF also corrected off the day’s lows. USD/JPY was stable near 158 as EUR/JPY recovered above 177 from lows below 176.50. AUD/USD was slightly firmer at .6970 and USD/CAD little changed near 1.4250.
European session
The substantive widening of the French-Germany government bond spreads has caused jitters around France and the Euro. This is not easy to fix with major fiscal consolidation unable to pass in the National Assembly for the minority government and global investors having close to Eur1trn of French government bonds. While last week EUR/USD was in focus, traders feel that EUR/JPY will lead the way this week. The U.S. employment report has tempered the USD rise and U.S. Treasury yields could move lower.
Other currency moves against the USD have been more controlled in Europe, though with a slight USD corrective tone. U.S. money markets are now discounting only a small probability of an October hike and any further weak data could raise questions about the 25bps expected in December.