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Nov 07 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Down On Weak EZ Data, Cushioned By Ok US Auction

By Randolph Donney  —  Nov 07 - 01:40 PM

The dollar index rose 0.36% on broad-based gains as its post-payrolls drop corrected further following an unexpected 1.4% drop in German industrial output and earlier risk-off flows that helped the haven U.S. currency.

EUR/USD fell 0.3%, finding support ahead of the 55-day moving average it finally blasted past after Friday's weak U.S. jobs report, now at 1.0650.

Fed speakers remained in character, mostly avoiding any clear indication that rates will be cut soon and keeping open the option of another hike if the current cooling of the labor market and inflation don't persist.

Comments from Fed Chair Jerome Powell on Wednesday and Thursday should carry more weight.

Treasury yields also slipped after Treasury's 3-year auction results were better than feared, which slowed the dollar's advance.

USD/JPY rose 0.26% and almost got back to Friday's pre-payroll plunge highs.
The bull Treasury yield curve steepening saw the 10-year yield fall 8.5bps, weighing on Treasury-JGB yield spreads, though 2-year yield spreads were only down 1.5bps, but at a still enticing 4.8%.

Hopes for the BoJ to exit its YCC and NIRP policies soon were unaided by Japan's September real wages falling 2.4% y/y, down for an 18th month, if less so than August's 2.4% drop. Household spending beat the -0.4% m/m forecast, but the 2.8% y/y fall was below forecast.

Treasury yields may have to continue trending lower to avert another test of 2023 and 2022 peaks at 151.74/94 and potential MoF intervention threats.

Sterling slid 0.44% with an extra nudge from BoE's Chief Economist Huw Pill's comments about mid-2024 being a possible slot for the first rate cut sending 2-year gilts yields down 7bps.

Aussie and CAD fell 1% and 0.5%, respectively, more than erasing Friday's rally and Aussie finding some support by its 55-DMA, with selling triggered by what was seen as a dovish RBA rate hike and tumbling commodity prices.

Crude prices fell 3.5%, with copper and gold also down as global growth concerns persist.

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Refinitiv IFR Research/Market Commentary


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