FX Daily Strategy: Asia, Nov 3

While Belgium is vying with France for attention in the Eurozone bloc, and tech still waiting to see if the early week bounce is a dead cat one to re-test the break or another spike move, oil very much forcing its way back into the centre of cross-market action.

This comes against a backdrop where IMM data once again underscored how overall long the market remains overall long of dollars, especially on the antipodean pairs, with AUD extending the all-time extremes.

Other pairs also attempting still to trace out near-term bases and bounces, EUR/USD building back above 1.12 recent pivot and cable also trying to firm back up.

The backdrop to the oil action picks up on the threads discussed in recent outlooks, both the broader framing of US and Israel domestic politics around elections, and the recent stance-shift signalled some days back by the reported letter sent by VD Vance. Without overreading into the media feeds, there does seem to be at least some shift towards positive instigation on the US side, in place of the prior hawkish positioning and preparation for post midterm strikes.

The market has heard and seen many variations of the current mediated talks and floated Strait opening proposals many times over of course but the current version seems to have a little more intent to it and perhaps more importantly hitting a market more heavily positioned away from incorporating positive scenarios into its risk-adjusted pricing.

NOK of course remains the counter most exposed to such a positive scenario surprise here, or even the reintroduced possibility of such a positive surprise. EUR/NOK breaks its ultra-consistent trend-down action of the last month, and around 10.5~ would be a round figure and about 38% back of the last leg (also 23% of the bigger leg down). NOK/SEK also highly responsive especially if oil can retreat further and influence risk sentiment with it – prior recently cleared tops of 1.04-480 are the first very close pullback support and back sharply through there does then look more toppy still. Risksbank and Norges bank meeting also feed into this but to an extent secondary to the oil led driver.

Turning to Tuesday, RBA offers the main event, though with the market very heavily priced to a hike (85-90%) and similar on the economist forecasts side. The Bank already largely signalled that concerns over the labour market would have to be set aside with further action given the inflation risks. This is reaching the limit of what even a globally-hawkishly-skewed money market thinks is absorbable and necessary though, with around a 1/3 skew towards one last follow through.  Commentary therefore more pivotal. The market has to an extent ‘bought the rumour’ since inflation data, but is actually still risk hedged very short.

Not a huge amount on early in the European day. French budget figures would ordinary be a complete ignore, but might currently be viewed as more topical.

Otherwise, Swiss CPI data is seen nudging up to 1.3% from 1%, but still very much the outlier in terms of being low and sub target. Broader risk and carry much more critical for CHF performance, in the context of its ongoing low inflation, low rates standout feature.

US focus remains on the midterms and on payrolls, with JOLTS data today in the buildup.