Sterling Volatile Amid Fiscal Plan Turmoil, Greenback Outperforms

Sterling was volatile on the final trading day of the week in Asia, with eyes still on the turmoil caused by the UK government's tax-cut plans. PM Truss refused to walk back on her fiscal proposals, but the press reported that she would hold emergency talks with the fiscal watchdog today, while some speculated that growing backlash among Tory backbenchers and a drop in support for the Conservatives might force the government to change tack.

• These musings put a bid into GBP crosses in early Asia trade, prompting cable to briefly erase its post-mini budget losses. Sterling strength proved short-lived and the pound retreated in the absence of fresh headlines. GBP/USD trades ~20 pips below neutral levels, with EUR/GBP barely changed as we type.
• The greenback regained composure after an initial spell of weakness and took the lead in G10 FX space, with month-/quarter-end flows seen playing a supportive role. Slightly higher U.S. Tsy yields facilitated the move higher in USD.
• USD/JPY climbed over the final Tokyo fix of the month. Worth noting that it was a Gotobi day in Japan. The spreads on U.S./Japan yields were slightly wider, with the BoJ boosting bond purchases at its regular operation.
• Official PMI reading suggested that China's manufacturing sector returned to expansion last month, but the Caixin index tracking smaller, export-oriented enterprises unexpectedly deteriorated. Spot USD.CNH crept higher as the data crossed the wires, before trimming gains.
• Final UK GDP, flash EZ CPI, German unemployment, as well as U.S. PCE readings, MNI Chicago PMI & final Uni. of Mich. Sentiment will take focus after Asia hours.
• The central bank speaker slate features Fed's Barkin, Brainard, Bowman & Williams, ECB's Elderson, Visco & Schnabel and Riksbank's Ingves & Jansson.