Europe Summary and Highlights 16 Oct
Fed's Warsh avoids guidance, so leaves mkt priced for Dec rather than Oct
Dollar continues to correct from recent overstretched run, most pairs lift from recent bases
Dollar remains generally on the slight backfoot as it gives ground from its overstretched run, with most pairs lifting from recent basing areas.
Fed’s Warsh was in forward-guidance-lite mode, saying he doesn’t prejudge meetings and he doesn’t ‘believe in saying now what I might do at the meetings that we have in the balance of this year’. That lack of nudge was enough to reinforce the market’s shift back to favouring Dec over Oct for the next Fed move, helping to leave yields and dollar lower after the CPI reaction failed to stick.
EUR/USD stretches the bounce from the regained 1.12 to 1.1250+, with cable back to 1.3330s. Antipodeans also firmer in dollar-led action, with kiwi continuing its post AUD employment outperformance. RBNZ’s Conway suggested yesterday the Oct decision was completely open, the OCR most likely to rise but not decided on timing.
MSCI signalled that Indonesia would be removed from the EM index and moved to standalone status – JKSE off around 14%, and USD/IDR up 0.5%. No wider impact though.