Europe Summary and Highlights 6 Oct

Europe

The USD is stabilising in Europe after a bounce in Asia.  USDJPY 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 today. 

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.