### United States
Today’s foreign exchange market is witnessing a prominent theme — a recovery of the yen, spurred by hawkish remarks from BOJ Governor Ueda. However, a broader tone of consolidation persists. An equity market sell-off is influencing dollar-bloc and Scandinavian currencies due to risk-averse trends. Emerging market currency performance is mixed; notably, the Mexican peso is stabilizing after reaching a yearly low yesterday. In the U.S., after peaking at a 4.34% yield on Tuesday, the 10-year Treasury yield briefly dipped but ended near 4.29%. Gold initially hit record highs above $2990 but has retreated, while oil remains firm. The day’s U.S. data include personal income and consumption figures already embedded in Q3 GDP, showing a modest rise of 2.8% amid stronger consumption rates. Looking forward, there’s anticipation surrounding the employment cost index, the best measure of labor costs, expected to rise by 0.9%. Tomorrow’s employment report, buoyed by a notable ADP increase, remains a focal point along with Canada’s upcoming August GDP data.
### Eurozone
In Europe, equity markets are under pressure, with Stoxx 600 down about 0.75%, marking what could be a third consecutive decline. This hasn’t sparked bond bids, as yields on benchmark 10-year bonds, particularly UK Gilts, have increased. Inflation in the eurozone saw a slight uptick, with consumer prices rising by 0.3% in October, marking a 2.0% annual rate. Notably, three major eurozone countries kept their inflation below this threshold, except Germany at 2.4%. The unemployment rate held at 6.3%, impressive amid sub-par growth. The euro marginally exceeded $1.0870 yesterday but is consolidating around $1.0855 today, with substantial option expiries looming. U.S.-German yield differentials continue to narrow, reflecting shifting market sentiments regarding ECB and Bank of England’s potential rate adjustments.
### United Kingdom
The UK budget presented a generational increase in taxes, approximately GBP41 billion, coupled with more borrowing, which influenced UK Gilt yields. Despite this, the rise was less pronounced compared to eurozone bonds. Labour’s approach, revealing some public spending increases, met with varied reactions, especially as inflation may trigger bracket creep. Sterling experienced volatility around the budget’s release, trading within a modest range yet failing to secure a position above $1.30. Option expiries today are noteworthy, reflecting persistent uncertainties in the market.
### China
In China, manufacturing and non-manufacturing PMI figures indicate a slight recovery, both edging above the 50 boom/bust line. The dollar faced a fluctuating path against the yuan following PBOC’s intervention, setting a reference rate at CNY7.1250, slightly down from yesterday’s CNY7.1390. These movements point to an ongoing but cautious recovery phase in the Chinese economy.
### Japan
Japan reports a largely anticipated hold on BOJ policy, with macroeconomic forecasts remaining stable. A sharp rebound in the yen followed Governor Ueda’s remark highlighting the economic impact of exchange rates. Although industrial output rose by 1.4% in September versus a 3.3% decline in August, Q3 figures indicate an overall decrease. Retail sales dipped by 2.3%, missing forecasts. The yen’s recovery against the dollar remains a notable development, particularly against key option expiries.
### Canada
Attention turns to Canada as it releases its August monthly GDP today, following periods of stagnation in earlier months. The U.S. dollar, nearing a yearly high against the Canadian dollar, saw some retracement, yet remains positioned to test higher levels. The risk-off sentiment from U.S. equity markets may provide some support to the greenback today.
### Australia
Australia’s economic landscape is characterized by a softer than expected retail sales increase of 0.1% in September and a stable inflationary environment, with underlying measures around 3.6%-3.7%. The RBA is set to meet next week, but there appears to be no pressing need for immediate action given the current macroeconomic conditions. The Australian dollar traded within a tight range today, lacking strong momentum.
### Mexico
In Mexico, after reaching a new two-year low, the peso is showing signs of stability despite mixed signals from Latam currencies. Quarter 3 GDP exceeded expectations at 1.0% QoQ, yet doubts prevail about the continuity of such growth. The Mexican peso’s reaction mirrors broader emerging market currency dynamics, where caution prevails amidst diverse macroeconomic indicators.
