Europe Summary and Highlights 29 October

European morning session

GBP fell back against then EUR in the European morning session, with EUR/GBP extending yesterday’s gains to make another new high for the year at 0.8814, the highest since May 2023. GBP/USD was also 15 pips lower on the morning, while EUR/USD gained 15 pips to 1.1645. The GBP decline looks to be a continuation of the trade started yesterday on the back of the reported OBR reduction in productivity estimates that will put further fiscal pressure on Chancellor Reeves’ November 26 Budget. There has also been an increase in the implied probability of a BoE rate cut at the November 6 meeting, which is now seen as a 35% chance. GBP was not affected by the UK money and credit data for September, which was on the strong side of expectations, with M4 up 0.6% m/ and mortgage lending and approvals both higher than expected.

The SEK also made gains through the morning, with EUR/SEK dropping 3 figures to 10.90 in response to much stronger than expected Q3 Swedish GDP data, which showed a 1.1% q/q rise in the provisional data. EUR/CHF was also notable higher, rising 30 pips to 0.9270, although without an obvious trigger. Other pairs were broadly stable.

Asia session

The Australian Q3 CPI has come in higher than expected at 3.2% y/y with trimmed mean CPI at 3% y/y. It is a strong number and has erased market participants expectation of a November cut from the RBA. The latest rhetoric from RBA governor Bullock has also turned hawkish and thus the next rate cut could be push towards Q1 2026. The AUD/USD is trading strongly at 0.6600 after a knee-jerk spike to 0.6607 on release. NZD/USD is only trading 0.02% higher while USD/CAD slips 0.02%.

U.S. Treasury Secretary Bessent posted on X praising Japan’s commitment to Bank of Japan independence and “policy space”. He also mentioned about the evolution of "Abenomics", all seems to be a kind of verbal prompt for stronger JPY. Japan Chief Cabinet Secretary Kihara did not give a response when asked about Bessent's remark. USD/JPY is trading 0.23% higher at 152.44 as the knee-jerk move fades. Else, EUR/USD is down 0.18% and GBP/USD is down 0.27%.