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Oct 27 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD's 7% July-Oct Slide Consolidates As C.banks Loom

By Randolph Donney  —  Oct 27 - 02:35 PM

The dollar index was about flat ahead of BoJ, Fed and BoE meetings and key October data slated for next week, amid consolidation of hefty greenback and Treasury yields gains since July.

Those Treasury and dollar gains also sent the S&P 500 down 7.8%, leading the Fed to acknowledge financial tightening.

The desire to book hefty profits on long dollar and short Treasuries trades persisted despite U.S. economic data continuing to beat forecasts on average versus euro zone data disappointments and UK upside surprises collapsing from summer highs.

Japanese data have modestly beat expectations and inflation remains well above the BoJ's target, not least because of the central bank's ultra-accommodative -0.1% policy rate and 1% cap on 10-year JGB yields next week's meeting may revise.

EUR/USD was flat, as Treasury yields were little affected by strong September consumer spending and core PCE's as-forecast rises from the prior month and year ago.
Also looked past was Michigan's 1-year consumer inflation outlook being revised up to 4.2% from 3.8%.

EUR/USD ran into sellers ahead of Wednesday's highs as investors looked ahead to a full slate of event risks including next Wednesday's ADP, ISM, JOLTS, Treasury issuance plans and Fed Chair Jerome Powell's post-FOMC presser.
Jobless claims on Thursday segue into Friday's employment report, seen hampered by UAW strikes, and services ISM.

USD/JPY fell 0.6% after Thursday's new 2023 high at 150.78 and a 10% rally from July's lows.
Friday's lows broke the uptrend line across September-October lows at 149.64, a close below which could see the key kijun support at 149.04 tested next.

The selloff was led by falling 2-year Treasury-JGB yields spreads, profit-taking and an unexpected rebound in Tokyo CPI.

Sterling fell 0.1%, and off earlier highs by the 10-day moving average amid the broader dollar pullback, with prices hovering near October's lows and skewed toward weakness on the BoE-Fed outlook.

The conflict in Israel and Gaza will be watched into the weekend as tensions in the region build and crude prices rose roughly 3% on Friday.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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