North American Summary and Highlights 7 October
Overview - The USD was firmer on the day, but came off the highs in North America as gains in oil faded.
North American session
Higher oil prices saw a fresh spike higher in UST yields but oil subsequently corrected lower, easing pressure in the bond market, which also delivered a healthy 10-year auction. The USD however saw only a modest correction from the highs.
FOMC minutes were hawkish seeing increased upside risks on inflation but balanced risks on employment, with another tightening seen as likely to be appropriate before year end. However there were no clear signals on October and the market showed little reaction.
USD/JPY drifted lower to nudge below 158. EUR/USD saw a modest recovery to around 1.12 with EUR/JPY stable near 177. EUR/GBP found a base near .8450,moving up to .8470. USD/CAD was firmer at 1.4260 from 1.4240. With AUD/USD finding support below .6950 AUD/CAD advanced to .9930 from .99.
European session
Lower oil prices and U.S. Treasury yields Tuesday have partially been reversed today with new Houthi attacks and concerns over shipping through the Red Sea prompted a rotation higher in oil prices. The September FOMC minutes are next in focus, with traders looking for clues on December and into 2027 with an October hike seen as unlikely.
EUR crosses have stabilized meanwhile, with the focus remaining on the 10yr French-German government bond spreads. Further narrowing could help EUR sentiment further, but the National Rally will likely ask for some of their politically sensitive expenditure cuts, which could lead to disagreement when the debate starts in earnest on October 13.