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FOREX: Risk-Off Footing Favours USD & JPY

FOREX
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  • Markets underwent a broad, but shallow, phase of risk-off alongside the European open Tuesday, with a dip in the belly of the US yield curve helping trigger a phase of equity selling and USD buying. As a result, EUR/USD has opened a >100 pip gap with the recent cycle high, aided by building expectations of a back-to-back 25bps rate cut at the ECB's October meeting. Eurozone CPI estimate came in alongside expectations for the Y/Y and Y/Y core reading, but downside risks were present in the monthly reading, which came in negative (-0.1% M/M) for the first time since January.
  • NOK is among the session's poorest intraday performers, slipping alongside general weakness in core global equity markets, and as the dollar strength and risk-off theme weighs on oil prices. WTI and Brent crude futures are off by over 2% apiece at typing, limiting any intraday bounce in commodity-tied FX.
  • GBP trades poorly as markets cap recent sharp gains - EUR/GBP yesterday crossed to new pullback lows, hitting 0.8313 before today's very modest bounce. The broader technical theme remains lower for the cross as the 100- and 50-dmas diverge further from the 200-dma. This indicates building short-term negative momentum, which exposes support at 0.8311 and the bear trigger further out at 0.8203.
  • ISM Manufacturing data set for release later today should be the highlight going forward, and is expected to continue to point to decelerating economic activity - mimicking the patterns laid out in yesterday's MNI Chicago PMI numbers. 
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  • Markets underwent a broad, but shallow, phase of risk-off alongside the European open Tuesday, with a dip in the belly of the US yield curve helping trigger a phase of equity selling and USD buying. As a result, EUR/USD has opened a >100 pip gap with the recent cycle high, aided by building expectations of a back-to-back 25bps rate cut at the ECB's October meeting. Eurozone CPI estimate came in alongside expectations for the Y/Y and Y/Y core reading, but downside risks were present in the monthly reading, which came in negative (-0.1% M/M) for the first time since January.
  • NOK is among the session's poorest intraday performers, slipping alongside general weakness in core global equity markets, and as the dollar strength and risk-off theme weighs on oil prices. WTI and Brent crude futures are off by over 2% apiece at typing, limiting any intraday bounce in commodity-tied FX.
  • GBP trades poorly as markets cap recent sharp gains - EUR/GBP yesterday crossed to new pullback lows, hitting 0.8313 before today's very modest bounce. The broader technical theme remains lower for the cross as the 100- and 50-dmas diverge further from the 200-dma. This indicates building short-term negative momentum, which exposes support at 0.8311 and the bear trigger further out at 0.8203.
  • ISM Manufacturing data set for release later today should be the highlight going forward, and is expected to continue to point to decelerating economic activity - mimicking the patterns laid out in yesterday's MNI Chicago PMI numbers.