![\"\"](\"\/wp-content\/uploads\/2024\/10\/image-91.png\")
<\/figure>\n\n\n\nGBP \u2013 UK inflation eases beyond expectations<\/h2>\n\n\n\n
\u2022 Economic data shook the pound in the past few days. UK employment data for August showed a tighter employment market than anticipated, the retail sales growth rate for the same month slowed down less than expected, yet the main release may have been the UK CPI rates for September that slowed down beyond expectations reaching levels below BoE\u2019s 2% target on a headline level. In a similar mood, also the PPI rates for the month contracted all aligning towards underscoring the easing of inflationary pressures in the UK.
\u2022 It\u2019s understandable that the slower CPI rates could enhance the dovish expectations of the market for BoE\u2019s intentions. BoE\u2019s Governor Bailey\u2019s comment for a more aggressive rate cutting path seems to find a strong footing and its understandable that the market increasingly prices in two rate cuts by the bank until the end of the year.
\u2022 On a fundamental level, we note the hard rains hitting the UK in past few days, disrupting travelling, closing schools and putting the UK national insurance to the test. Furthermore we note the protest for the Government decision to cut winter fuel subsidies.<\/p>\n\n\n\n
Analyst\u2019s Opinion (GBP) \u201cWe see the case for GBP\u2019s weakening in the coming week to continue should BoE policymakers verify the market\u2019s dovish expectations, while on a macroeconomic level, pound traders may focus on the release of the preliminary PMI figures for October on Thursday. Fundamentals may gain some traction yet for the time being seem to be subdued and have lessening importance.\u201d<\/em><\/p>\n\n\n\n \u2022 Monetary-policy-wise, we tend to see a slight shift of BoJ\u2019s stance. It\u2019s characteristic that BoJ policymaker Adachi stated that the bank should continue on the rate hiking path on a \u201cvery moderated\u201d pace. The bank\u2019s efforts to normalise its monetary policy is facing increased headwinds also on a political level. Analyst\u2019s Opinion (JPY) \u2022 On a monetary policy level the ECB delivered the much awaited rate cut yesterday. In the accompanying statement, the bank mentioned that it remains data driven, yet ECB President Lagarde in her press conference allowed for the scenario of another rate cut until the end of the year. Overall we see the case for the ECB to maintain a dovish stance in the coming week, A number of ECB policymakers are scheduled to speak next week, yet the speech of ECB President Lagarde\u2019s at the Atlantic Council next Wednesday about Europe\u2019s economic outlook seems to stand out and may affect EUR traders stance. Analyst\u2019s Opinion (EUR) \u201cThe common currency seems to be about to end the week in the reds across the board in the FX market and it may prove to be a hard case to be made for EUR bulls. Overall we see the case for ECB\u2019s stance to continue to weigh on the common currency. One small exception that could provide some support for the EUR would be an improvement, possibly better than expected PMI figures, despite some remaining below the reading of 50. \u201d<\/em><\/p>\n\n\n\n \u2022 On a macroeconomic level may be the most important release in the past few days for the Aussie was Australia\u2019s employment data for September. The data aligned towards pointing a tighter employment market in Australia, with the unemployment rate unexpectedly ticking down and the employment change figure rising to 64.1k. In the coming week we see no major financial data releases in the calendar, maybe with the exception of the October\u2019s preliminary PMI figures. Other than that we expect fundamentals to lead the Aussie in the coming week. Analyst\u2019s Opinion (AUD) \u2022 The main factor affecting the Loonie in the past few days may have been the release of Canada\u2019s CPI rates for September. The release underscored the further easing of inflationary pressures beyond market expectations on a headline level. In the coming week, we may see CAD traders turning their attention on the release of Canada\u2019s September PPI rates and August retail sales, yet both events may be overshadowed by the release of BOC\u2019s interest rate decision, next Wednesday. Analyst\u2019s Opinion (CAD) As a closing comment we remain concerned about the high number of fundamental issues tantalizing the markets. Traders have to juggle the risks stemming from the US elections, the Israeli-Palestinian conflict, the war in Ukraine, the trade war in China, the economic recovery of China and the divergence of the macro outlook of various developed economies. Hence we tend to maintain the view that the markets remain very sensitive and possibly overreacting from time to time. In the coming week, we expect the USD to relent some of the initiative in the FX market, given that the gravity and frequency of US financial data eases, thus allowing for a more balanced trading mix to be formed in the coming week. As for US stock markets, the earnings season is in full swing creating headlines and catching market participants attention. It\u2019s characteristic how the early release of ASML\u2019s earnings reports created a rollercoaster ride for tech shares. In the coming week we note the earnings releases of Lockheed Martin(#LockheedMT) on Tuesday, Tesla (#TSLA), Coca Cola (#KO), Boeing (#BA), IBM (#IBM) on Wednesday and Mastercard (#MA) and Amazon (#AMZN) on Friday. A positive, risk oriented market sentiment could provide renewed support for US stock markets and vice versa. As for gold we note that the negative correlation of the precious metal\u2019s price with the USD seems to have been breached as both trading instruments edged higher for the week, with gold touching new record highs. Fundamentals leading the precious metal may include a number of uncertainties on a fundamental level, providing support for gold and we may see that course being maintained should market worries be enhanced.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2024\/10\/image-92.png\")
<\/figure>\n\n\n\nJPY \u2013 Hawkishness of BoJ eases?<\/h2>\n\n\n\n
\u2022 On a fundamental level, JPY\u2019s dual nature may come once again under the spotlight, especially given the tensions between South and North Korea. Also tensions at the Taiwan straits may increase its importance in the international markets and getting some support.
\u2022 On a macroeconomic level we note the slowdown of September\u2019s CPI rates and turn our attention towards the release of Japan\u2019s preliminary PMI figures next Thursday in an indication of economic activity for October. Further and deeper contraction of economic activity in the manufacturing sector may weigh on the JPY while on Friday\u2019s Asian session we get a fresher view on inflation in the wider Tokyo area for October.<\/p>\n\n\n\n
\u201cJPY\u2019s direction seems to be in the balance. On the one hand, further indications of BoJ delaying its monetary policy normalisation could weigh on the JPY. Hence we highlight BoJ Governor Ueda\u2019s speech for more clues about the bank\u2019s intentions. On the fundamental side we expect any major escalation in the prementioned conflicts to provide safe haven inflows for the JPY, yet the actual escalation remains highly uncertain. \u201d<\/em><\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2024\/10\/image-93.png\")
<\/figure>\n\n\n\nEUR \u2013 Preliminary October PMI figures in focus<\/h2>\n\n\n\n
\u2022 As for financial releases we highlight the preliminary PMI figures for August next Thursday. We intend to focus on France\u2019s services PMI figure Germany\u2019s manufacturing sector and for a rounder view Eurozone\u2019s composite PMI figure. Please note that the September data showed a wide contraction of economic activity in Germany\u2019s manufacturing sector dragging all the area lower, thus painting a rather gloomy picture for the area\u2019s economic outlook. We also intend to keep an eye out for Germany\u2019s October Ifo indicators.
\u2022 On a fundamental level, the sentiment about the Eurozone and Germany in particular seems to be darker by the day. There seems to be no light at he end of the tunnel nor any solutions seem to surface by European politicians. The political climate is tense and the threat of a populist, far right shift is present if not growing. Furthermore, the ongoing war in Ukraine and the possible repercussions of the EU imposing sanctions on Chinese EV\u2019s do not come the EUR\u2019s aid.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2024\/10\/image-94.png\")
<\/figure>\n\n\n\nAUD \u2013 Developments in China to affect the Aussie<\/h2>\n\n\n\n
\u2022 On a monetary level the tightening of the Australian employment market tended to enhance the market\u2019s expectations for RBA to remain on hold for the rest of the year. Furthermore RBA Assistant Governor Hunter stated that inflation proved stickier than anticipated. We expect RBA policymakers in the coming week to maintain a hawkish stance.
\u2022 The fundamentals issues revolving around the Aussie cannot escape developments in China, given the close Sino Australian economic ties. China\u2019s September deflationary data, trade data, industrial output, retail sales and Q3 GDP rate highlighted the issues surrounding the recovery of the Chinese economy The release of the Q3 GDP rate highlighted the distance of economic reality with the Chinese government\u2019s target of a 5%yoy GDP rate. Calls for a wider stimulus by the Chinese Government and its central bank tended to gain further traction and uncertainty may have been enhanced. There is still a positive aspect in the release as the market may have been expecting a wider slowdown of the GDP rate. Furthermore, we note that the retail sales growth rate for September accelerated, in a positive signal for the internal demand side of the Chinese economy, as did the industrial output growth rate in a signal of increased economic activity in the sector. Finally, the Urban investment growth rate failed to slow down, in a sign of how the construction sector in China despite its problems, hasn\u2019t given up. We turn our attention to Monday\u2019s Asian session, as we get from China, PBoC\u2019s interest rate decision. The big question mark is whether the bank will give into markets\u2019 pressure and lower interest rates with special highlight being set on the loan 1-year and loan 5-year rates or not. A possible easing of the bank\u2019s monetary policy could weigh on the Yuan somewhat, yet at the same time may improve the market sentiment and support riskier assets such as equities and commodity currencies such as the AUD.<\/p>\n\n\n\n
\u201cOn a monetary policy level we tend to view the Aussie as being well supported by RBA\u2019s stance, yet the issues surrounding the Chinese economic recovery tend to outweigh it and should they be enhanced in the coming week, we may see the Aussie slipping. \u201d<\/em><\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2024\/10\/image-95.png\")
<\/figure>\n\n\n\nCAD \u2013 BoC\u2019s interest rate decision in focus<\/h2>\n\n\n\n
\u2022 Hence monetary policy is expected to be the main driver in the coming week for the CAD. The bank is expected to deliver a 50 basis points rate cut and the market prices in more rate cuts to come. Hence any failure of the bank to deliver the double rate cut and signal that more are to come may support the Loonie as it could contradict market expectations and may force the market to reposition itself.
\u2022 On a fundamental level, we note the path of oil prices as an issue for the CAD given the perception of a positive correlation of the Loonie with oil prices. Any weakening of oil prices could weigh on the Loonie, while should oil prices start rising again, we may see the CAD getting some support.<\/p>\n\n\n\n
\u201cOverall, the CAD\u2019s weakening is expected to be maintained at least against the USD, under the hypothesis that the above assumptions hold water. Nevertheless we cannot stress enough for Loonie traders the predominance of BoC\u2019s monetary policy intentions, over financial data and fundamentals, as to be expressed in its meeting next Wednesday. \u201d<\/em><\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2024\/10\/image-96.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n