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Greenback Makes Solid Gains Into Month-End, GBP Poorest On The Board

FOREX
  • The USD traded on the front foot for the entirety of Monday’s trading session with the USD index grinding 0.75% higher to start the week. This comes as markets gear towards positioning for the upcoming Fed rate decision on Wednesday.
  • GBP was the poorest performer in G10, falling against all others and further unwinding some of the recent outperformance to put GBP/USD (-1.30%) comfortably back below the 1.15 mark.
  • Weakness for the Chinese Yuan persisted throughout the day, with the latest wave of pressure following overnight source reports from Bloomberg, that the US has raised the idea of export control regimes for China with their European partners - mimicking the patterns and techniques used with Russia.
  • Furthermore, weaker Purchasing Managers' Index, sliding to 49.2 (contractionary zone) in October from 50.1 in September underpinned the strength seen for USDCNH. The non-manufacturing PMI also dropped by 1.9 points to 48.7, falling below 50 for the first time since May.
  • Greenback gains were fairly broad based with both the Euro and Japanese Yen falling victim. USDJPY continues its recovery from the post-intervention 145.11 lows to trade just shy of the 149 handle. In similar vein, EURUSD traded consistently lower despite above expectation Eurozone CPI prints and is now back below 0.99. On the technical front, markets will be watching key support at 0.9839, the former bear channel resistance.
  • Overnight we have the RBA decision/statement. While inflation showed no signs of slowing in Q3, recent RBA commentary gives many reasons why it is likely to stick to 25bp in November rather than return to a 50bp move. In the US, we have ISM Manufacturing PMI as well as Jolts data before Wednesday’s FOMC decision.
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