North American Summary and Highlights 9 October
Overview - The USD made gains versus EUR and CAD, the latter hit by weak employment data.
North American session
The USD made gains in the North American session, most notably on EUR/USD, which saw lows below 1.12 before a late correction, and USD/CAD, which tested but failed to breach 1.43 on a weak Canadian employment report. September saw a sharp fall of 68.3k, though this was fully explained by a 70k loss in public sector jobs, while unemployment rose to 6.5% from 6.4%.
US data showed the preliminary October Michigan CSI falling to 46.3 from 48.1, with inflation expectations moving marginally higher while Trump renewed his efforts to oust Fed Governor Lisa Cook. Oil saw modest renewed gains before a late dip as Trump announced a deal with Russia to supply diesel to the US and global markets.
The latter helped the USD off its highs but movement in most FX pairs was modest, USD/JPY stable around 158.25. AUD/CAD advanced above .9950 with AUD/USD stable. EUR/GBP fell to .8460 from .8475 and EUR/CHF fell below .93 as the USD failed to sustain early gains versus GBP and CHF.
European session
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 note 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 Bessent 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.