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Euro-zone M3 money supply growth slowed to 7.4% in the year to September from 7.9% previously and slightly below consensus forecasts.  The Euro was unable to make any headway into the New York open with a further test of support below 1.1600 against the dollar, although narrow ranges prevailed.

US durable goods orders declined 0.4% for September after a 1.3% gain the previous month, although this was significantly stronger than consensus forecasts. Underlying orders increased 0.4% on the month which was in line with expectations.

The goods trade deficit increased to a record $96.2bn for September from $88.2bn the previous month and well above consensus forecasts of $88.5bn. Exports declined sharply on the month as supply issued had a significant impact while there was a small increase in imports for the month.

There was no significant reaction from the data with the dollar unable to gain sustained support. In particular, expectations of tighter monetary policies underpinned commodity currencies and the Euro was able to trade just above 1.1600 despite weak underlying sentiment.US trade issues could pose a medium-term dollar threat.

The ECB policy meeting will be monitored closely on Thursday with expectations that the bank would push back against higher yields, although the December policy meeting is likely to be more important for policy decisions. Narrow ranges prevailed on Thursday with the Euro just above 1.1600 as commodity currencies held firm.




During Wednesday, there were further concerns over the Chinese real-estate sector with reports that several developers were proposing debt maturity extensions and restructuring to ease short-term debt difficulties. There were also some concerns over US-China geo-political developments with further tensions over Taiwan.

Wall Street equities overall fluctuated around the unchanged level into the European close, but the main focus was on bond markets with a substantial decline in yields on the day. The 10-year yield dipped to below 1.55% which had a significant impact in curbing US dollar support and triggering a covering in short yen positions. In this environment, the dollar dipped to lows below 113.50 against the Japanese currency.

Markets monitored US fiscal developments with House Democrats set for a key meeting on Thursday, although the GDP data is likely to have a larger immediate impact.

The Bank of Japan made no changes to monetary policy, in line with market expectations. Near-term GDP and inflation forecasts were lowered, although there was limited market reaction. The yen was resilient with the dollar held close to 113.50 against the yen while the Euro weakened to 131.75.




Sterling moved significantly lower ahead of Wednesday’s UK budget speech with a slide to lows just above 1.3700 against the dollar while the Euro recovered to around 0.8460. There were some concerns over the Brexit situation with Prime Minister Johnson warning that conditions for invoking article 16 would be met if there was not rapid progress over the Northern Ireland protocol, although economic developments dominated.

Chancellor Sunak pledged increased spending in the autumn budget statement with revised growth and borrowing forecasts from the Office of Budget Responsibility giving increased room for manoeuvre. The 2021 GDP growth forecast was revised higher, although below the most recent Bank of England estimate. The overall tax burden will increase to over 50-year highs, but departmental spending levels were notably higher than expected.

There was a significant reduction in estimates of bond issuance which was a significant factor pulling yields lower and this was important in curbing near-term Sterling support. The 10-year yield retreated to below 1.05% while markets estimated that the chances of a Bank of England rate hike next week had fallen to near 60%.

The UK currency regained some support after the Bank of Canada policy decision with the more hawkish than expected tone triggering fresh expectations that the Bank of England could focus on inflation concerns. Sterling settled below 1.3750 against the dollar with the Euro around 0.8445 and little net change on Thursday.




The Swiss ZEW economic expectations index retreated to 15.6 for October from 25.7 the previous month with supply-side shortages curbing sentiment.

The Swiss franc maintained a strong tone during Wednesday with support from a dip in global bond yields. There were also expectations that the ECB would maintain an accommodative policy stance while the Swiss National Bank balance sheet will expand at a slower rate. The Euro dipped to 15-month lows below 1.0650 before a slight recovery while the dollar retreated to below 0.9170. The franc retreated marginally on Thursday, although with only slight dollar gains to 0.9190.

Technical Levels 

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