North American Summary and Highlights 10 Oct
Overview - Trump threatened a massive increase in tariffs on China and the USD weakened, though AUD/USD was weaker. AUD/CAD fell sharply with the CAD supported by a strong Canadian employment report.
North American session
The main move of the day came after Trump threatened a massive increase in tariffs on China in retaliation for Chinese restrictions on rare earth exports. This sent equities sharply lower with UST yields and the USD also slipping. EUR/USD rose to 1.1615 from 1.1575 and USD/JPY fell to 151.65 from 152.65. EUR/CHF fell to .9300 from .9320 while AUD/USD fell below .65 from .6550 as risk appetite fell.
Before the Trump comments USD/CAD had fallen to a low of 1.3976 from 1.4015 on a stronger than expected September Canadian employment increase of 60.4k. After Trump’s comments the reaction was less sharp than elsewhere but a gradual return to pre-data levels was seen, before renewed slippage to around 1.40. AUD/CAD fell sharply below .91 from near .92.
The Preliminary October Michigan CSI was almost unchanged at 55.0 from 55.1. Fed’s Waller stated the Fed should ease only in 25bps increments while Musalem saw limited room for further rate cuts.
European morning session
There was little net change in any of the majors through the European morning. USD/JPY dipped early in the session when the LDP’s current coalition partners Komeito announced they were leaving the coalition, but the decline was short lived, with USD/JPY returning to opening levels at 152.80 after hitting a low at 152.40.
The USD did make some modest gains against some of the riskier currencies, with AUD/USD and GBP/USD both losing around 15 pips to 0.6550 and 1.3290 respectively, but EUR/USD was little changed near 1.1570.
EUR/NOK gained 4 figures through the morning to 11.69, mainly due to the mild sell off in the riskier currencies. There was only a very modest initial reaction to the Norwegian CPI data, which showed a slightly below consensus rate of 3.0% y/y in the targeted core measure, although the headline rate was a little higher than expected at 3.6% y/y.