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Oct 18 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Up Slightly On Mixed U.S. Data, Waning UK Risk-On Flows

By Randolph Donney  —  Oct 18 - 01:50 PM

The dollar index held marginally firmer on Tuesday after bullish U.S. industrial production and bearish homebuilder sentiment nL1N31J1A0 while sterling was no longer as supported by falling gilts yields after the BoE said it would start its QT debt sales on Nov.
1 nS8N31509T.

Global risk acceptance rebounded and the haven dollar fell on Monday after the new UK finance minister announced far less stimulative budget plans that sent gilts yields tumbling and the pound sharply higher nL8N31I1LM, diminishing the conflict between fiscal and monetary policy.

Though stocks continued higher on Tuesday, the FTSE 100 lagged and gilts yields only modestly extended Monday's collapse after the BoE offered a brighter assessment of financial risks and thoughtfully postponed the start of QT from Oct.
31 -- the day Treasury will announce its medium-term budget -- to Nov.
1 nS8N31509T.

Sterling fell 0.35%, trading inside Monday's range and with October's recovery attempts stuck below key resistance by 1.1500.

EUR/USD was marginally higher, though much farther below October's recovery high than sterling.
The risk-on bias is supportive, though the news from the war in Ukraine looks more destabilizing nL4N31J0V6 and an EU plan to cap natural gas prices remains thwarted nL1N31J0IF.

European gas prices tumbled 14.4% to their lowest in four months, with a major backlog of LNG ships waiting to secure slots to unload at European terminals nL1N31I2G9.

USD/JPY hit two new 32-year highs Tuesday, one at 149.29 before a 5-minute plunge to 148.125 intraday lows, following Japanese intervention warnings nL1N31J17E, and a later 149.395 EBS peak bolstered by a rebound in Treasury yields.

Prices may also have been supported by Bank of Japan Governor Haruhiko Kuroda, who said he had no intention of stepping down, while Prime Minister Fumio Kishida defended the BOJ's policy nT9N307043.
That as yen weakness and imported inflation create political friction and raise speculation the BoJ will eventually reduce easing.

More U.S. housing data is due out Wednesday, though the Fed's beige book may have more traction with markets.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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