Europe Summary and Highlights 5 November

European morning session

A generally quiet European morning saw the USD generally slightly lower with the riskier currencies generally outperforming. AUD/USD gained 20 pips to 0.6620 an EUR/USD also gained around 20 pips to test 1.09. The CHF performed strongly with EUR/CHF dropping 20 pips to 0.9390. Scandis also made modest gains against the EUR, but EUR/GBP was unchanged. USD/JPY also dropped around 20 pips to 152.20.

There was no data of note, and the dip in the USD was generally seen as position squaring ahead of the election. Option volatility has risen sharply with overnight EUR/USD vol the highest since 2017 and 1 month vol the highest since early 2023, suggesting substantial hedges are being put on.

Asian session

In the November meeting, the RBA has kept rates unchanged at 4.35% without a hint they will be cutting earlier despite headline CPI approaches target range. RBA acknowledged the fall in inflation but highlighted such moderation was partially due to government rebate. The rhetoric continues to push back expectation of early easing but provides little news, suggesting their view of first cut in mid 2025 did not change.  The Aussie is unfazed by the decision as it did not change expectation. AUD/USD remains 0.1% higher at 0.6591, NZD/USD and USD/CAD are unchanged

Regional risk sentiment started on a better note (up more than a percent) on Tuesday while U.S. three major equity indexes are recovering earlier losses. JGB yields are lower so far on the Tuesday's Asia session while U.S. Treasury yields perform slightly better. USD/JPY edged higher but still has way to close Monday's opening gap. USD/JPY is currently trading 0.2% higher at 152.42, almost half a figure away from Friday close at 152.92. Else, EUR/USD and GBP/USD are also unchanged for the session.