North American Summary and Highlights 21 October
Overview - In a quiet session GBP was supported by inflation data and EUR reasonably resilient to France risks.
North American session
With the data calendar quiet the USD was little changed, though did see a modest pick-up in mid-session that was subsequently reversed. USD/JPY failed to sustain a dip below 158. EUR/USD found support at 1.1220 before bouncing to 1 1240. EUR/GBP and EUR/CHF saw little movement thought GBP/USD sustained a European bounce to 1.34 from 1.3380. USD/CAD saw a spike to 1.4080 before returning to 1.4050. AUD/CAD was stable near 0.9880 with AUD/USD slightly firmer near 0.7030.
European session
French 10yr yields hit 5% with OAT-bund spread back out to the recent peak wides as pressure persists. Mild euro underperformance, though, as stretched background still containing follow through. EUR/GBP looking sub 0.84 around the fib support level, cable testing 1.34.
UK inflation comes in firmer than expected at 3.5% vs 3.4% market and running a good ½ pp above its previous projections. Core also up to 2.8% (mkt 2.7%). Keeps market largely priced for a Nov hike.
RBA’s Hauser suggests ‘pretty clear’ that ‘materially worse’ inflation would come in above RBA forecast and that the RBA was in a world of hard choices in terms of protecting the labour market. Nov hike odds nudging above 50-50. Market was at extreme AUD short positioning levels so helping short covering move off AUD/USD double bottom.