Europe Summary and Highlights 9 Oct
USD has drifted off Friday against most currencies due to a number of reasons.
President Trump has ruled out an attack on Iran before the mid-terms, which has eased oil prices and U.S. Treasury yields. Additionally, the 10bps decline in 10yr U.S. Treasuries since Thursday morning comes against a backdrop that some fund managers argue that yields have overreacted in September. Some end of week profit-taking has also been evident in long USD positions. This sets the tone going into early Europe. However, traders not that the market will likely settle down with the U.S. holiday Monday and U.S. September CPI on October 14.
On USD/JPY, the sense is that fresh news is required to trigger a move, as both Fed and BOJ are expected to hike by 25bps in December. Most feel it will be U.S. or Japan data, with the question of key levels on USD/JPY downside also important. However, we would also point to potential jawboning from U.S. Treasury secretary Bessant who is concerned that higher JGB yields are hurting Treasuries. If he jawbones USD/JPY before the mid-terms it could help him with his demanding boss Trump.