Euro readies to register weekly loss on European interest rate prospects
- Inflationary pressures recede on ECB policymakers
- Bearish remarks from ECB President
- Mounting odds of ECB rate cut in October
The euro lost ground in European trade on Friday, extending the losses for the sixth straight session against the dollar and about to mark three-week lows, and the worst weekly loss since late August.
It comes as the odds of an ECB interest rate cut in October climbed after recent inflation data and bearish remarks from ECB President Christine Lagarde.
The Price
The EUR/USD pair fell 0.1% today to $1.1025, with a session-high at $1.1039.
The pair closed down 0.15% on Thursday, marking the fifth loss in a row, and hitting three-week lows at $1.1008 after strong US services data.
Weekly Trades
Across the week, the euro is down 1.2% so far against the dollar, about to mark the first weekly loss in three, and the largest since late August.
European Inflation
Earlier official eurozone data showed mainline inflation fell to 3-⅕ year lows in September as inflationary pressures recede on the ECB policymakers.
The eurozone consumer prices rose 1.8% y/y in September, the slowest such pace since February 2021, and down from 2.2% in August.
Core prices rose 2.7% in September as expected, down from 2.8% in August.
Lagarde
ECB President Christine Lagarde told the European Parliament on Monday that recent developments bolster the case that inflation is returning to targets on schedule, which should reflect on the October 17 policy decisions.
European Rates
Following the data and remarks, the odds of an ECB 0.25% interest rate cut in October rose from 80% to 95%.
US Rates
According to the Fedwatch tool, the odds of a 0.5% Federal Reserve interest rate cut in November stood at 33%, while the odds of a 0.25% cut stood at 67%.
Now investors await the all important US payrolls data later today to gather more clues about the future path of interest rates.
Yen about to mark biggest weekly loss since 2022 after Ishiba's remarks
The Japanese yen rose in Asian trade on Friday against a basket of major rivals, while heading for the first profit in three sessions against the dollar, moving away from recent six-week lows.
Despite the gains, the yen is still heading for the heftiest weekly loss since 2022 after somewhat bearish remarks from the Japanese PM Shigeru Ishiba, which hurt the odds of a third Japanese rate hike this year.
The yen is also pressured by higher US 10-year treasury yields before the release of the all important US payrolls report, which would provide clues on the November interest rate cut.
The Price
The USD/JPY fell 0.5% today to 146.14, with a session-high at 146.93.
The yen fell over 3% on Thursday against the dollar, plumbing six-week lows at 147.24.
Weekly Trades
Across the week, the yen is down a sharp 2.8% so far against the dollar, heading for the second weekly loss in three weeks, and the largest since May 2022.
Shigeru Ishida
After a meeting with Bank of Japan Governor Kazuo Ueda, the new PM Shigeru Ishiba said that current economic conditions don’t support another interest rate hike.
Shigeru however did assert that the BOJ will make its decisions independently on monetary policies.
Japanese Rates
Investors now see little chance of a Japanese interest rate hike in October, and a small chance as well of a hike in December.
US Yields
US 10-year treasury yields are trading near four-week highs at 3.855%, which underpins the dollar.
It came after strong US services data for September, which reduced the concerns about a sharp recession.
According to the Fedwatch tool, the odds of a 0.5% Federal Reserve interest rate cut in November stood at 33%, while the odds of a 0.25% cut stood at 67%.
Franc skids to three-week trough after Swiss inflation data
- Swiss inflation at the lowest in three years
- Inflationary pressures on SNB recede
- Mounting odds of a fourth Swiss rate cut
The Swiss franc fell in European trade today on track for the fourth straight loss against the US dollar, plumbing three-week lows after Swiss inflation data.
Swiss consumer prices marked three-year lows in September as inflationary pressures receded on policymakers, in turn boosting the odds of a fourth Swiss rate cut.
The Price
The US dollar rose 0.5% against the Swiss franc to 0.8537, the highest since September 12, with a session-low at 0.8488.
Franc closed Wednesday down 0.4%, marking the third loss in a row following strong US labor data.
Swiss Inflation
Earlier Swiss inflation showed consumer prices rose 0.8% y/y in September, the slowest such rise since July 2021, and down from 1.1% in August.
On a monthly basis, consumer prices actually fell by 0.3%, below estimates of a 0.1% decline.
It’s now heavily likely the Swiss National Bank will perform the fourth interest rate cut this year at the December meeting.
The SNB
At the September 26 meeting, the SNB cut interest rates for the third meeting in a row by 0.25% to 1%.
The SNB said back then that inflationary pressures have cleared receded compared to the previous quarter, and it might be necessary to issue even more rate cuts to stabilize prices.
Yen extends losses to six-week low on Shigeru Ishiba's remarks
- Japan’s PM commits to supporting the economy
- Receding odds of a third Japanese rate hike this year
The yen fell in Asian trade on Thursday against a basket of major rivals, extending losses for the second day against the US dollar and plumbing six-week lows after remarks by the new Japanese PM Shigeru Ishiba on supporting the world’s third largest economy, which in turn reduced the odds of a third Japanese interest rate hike this year.
The yen is also pressured by higher US 10-year treasury yields before important US labor data on Friday.
The Price
The USD/JPY rose 0.55% to 147.24 yen per dollar, with a session-low at 146.28.
The yen lost over 2% on Wednesday against the dollar, marking the second loss in three days, and the largest since June 17, 2022 after bearish remarks from the new Japanese PM.
Ishiba
After a meeting with Bank of Japan Governor Kazuo Ueda, the new PM Shigeru Ishiba said that current economic conditions don’t support another interest rate hike.
Shigeru however did assert that the BOJ will make its decisions independently on monetary policies.
Japanese Rates
Investors now see little chance of a Japanese interest rate hike in October, and a small chance as well of a hike in December.
US Treasury Yields
US 10-year treasury yields rose 0.4% on Thursday, extending the gains for another session and boosting the greenback against main rivals.
The developments came after strong US private sector employment data in September, which showcases the flexibility of the US labor sector.
According to the Fedwatch tool, the odds of a 0.5% November interest rate cut by the Federal Reserve dipped further to 34%, while the odds of a 0.25% rate cut rose to 66%.
Now investors await the all important US payrolls report tomorrow to gather more clues.