North American Summary and Highlights 29 Oct
Overview - After slipping ahead of the FOMC decision, a comment from Chairman Powell in the press conference that a December easing was far from assured saw the USD finishing firmer.
North American session
The Bank of Canada eased by 25bps as expected but with the statement suggesting that if the economy evolved as expected rates were now at an appropriate level USD/CAD slipped from 1.3930 to touch below 1.39. The USD was generally slightly softer heading into the FOMC, EUR/USD rising to 1.1660 from 1.1640, but a dip in USD/JPY below 152 from 152.20 was corrected.
The FOMC eased by 25bps as expected. The USD saw a modest positive reaction to the statement, which saw economic activity expanding at a moderate pace and inflation having moved up since earlier in the year. USD gains accelerated in Chairman Powell’s press conference after he noted strong differences of opinion on policy going forward, and stated that a December easing was far from sure, in fact far from it. USD/JPY bounced to near 153 while EUR/USD fell to near 1.16. USD/CAD rebounded above pre-BoC levels to 1.3950.
European morning session
GBP fell back against then EUR in the European morning session, with EUR/GBP extending Tuesday’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.