North American Summary and Highlights 6 October

North American session

The USD saw some slippage that was attributed to lower oil prices weighing on UST yields. The oil price recovered later in the session, but the USD remained softer, as did UST yields, while equities built gains. Data showed the August US trade deficit at $105.6bn from $92.8bn the widest since the pre-tariff record of March 2025 while the Canadian trade surplus of C$4.2bn from C$0.8bn was the strongest since May 2022.

USD/JPY was stable between 158 and 158.20. EUR/USD, after having found support above 1.12, recovered to 1.1260 as EUR/JPY stabilized near 178. EUR/CHF was firmer but EUR/GBP slightly softer. AUD/USD made only marginal gains but USD/CAD slipped to 1.4210 from 1.4270.

European session

The USD is stabilizing in Europe after a bounce in Asia.  USD/JPY rejecting the 158.00 key level, has produced some caution among the USD bulls.  Additionally, though a report suggests that the BOJ in October will declare that 2% inflation has been meet, the BOJ is only expected to hike by 25bps in December in line with the Fed.  Also nothing really new from BOJ Ueda comments earlier. 

Meanwhile for EUR/JPY, it is worth noting that 10yr France-Germany spread has narrowed from the highs, as hopes rises in Europe that the 2027 budget will be passed rather than a rollover special law budget like 2025 and 2026.  EUR/USD is more consolidative, as traders want to see a larger correction.

Traders bias is choppy sideways trading, with a focus on U.S. government bond yields.  In this context some traders are pointing to the WSJ report that crude oil flows through the Straits of Hormuz last week reached 76% of pre-war levels (though much lower for diesel) and the associated softening of crude oil prices.  If U.S. Treasury yields decline it could be catalyst for a USD drift lower in a quiet data week.