- At midday in London the GBP and EUR were among the strongest while the AUD, NZD and CHF were the weakest
- The economic calendar is full of data today and so far, the biggest event was the RBA’s rate cut, a decision which was mostly priced in - although the central bank still surprised the markets by providing a more dovish assessment of the economy and indicated rates could be loosened further if needed.
- The EUR rose even though the Eurozone headline CPI fell further in September to 0.9% y/y, when an unchanged reading of 1.0% was expected. Core CPI rose however to 1.0% from 0.9%, in line with expectations. Meanwhile, the latest Manufacturing PMIs from the UK (48.3 vs. 47.0 expected) and Japan (Tankan) both beat, while those from Italy (47.8 vs. 48.2), Spain (47.7 vs. 48.2) and Switzerland (44.6 vs. 46.5) all disappointed. Still, Eurozone final PMI was revised a touch higher (to 45.7) thanks to a small positive revision for Germany. Nevertheless, all the above-mentioned PMIs remained below the boom/bust level of 50.0, pointing to falling economic activity and underscoring the need for further monetary stimulus by major central banks. Among the notable movers in FX, the USD/CHF broke above parity as Switzerland’s retail sales printed -1.4% y/y vs. +1.6% expected and the manufacturing PMI also disappointed as per above.
- The Swiss franc and other safe haven assets such as gold and Japanese yen have been weighed down in recent days by ongoing risk-on trade with stocks remaining overall supported (even if the EU indices started today’s session on the back foot) amid US-China trade optimism and central bank support.
- Is today’s weak start for European stocks due to fund managers rebalancing their portfolios? After all, Q3 ended with a bang for global indices. The S&P 500 recovered from a bad August to record its biggest year-to-date gain in more than 20 years. In Europe, too, the indices recovered to end Q3 noticeably higher. With central banks remaining in expansionary policy mode, and optimism rising that a US-China deal might be imminent, the stock market bulls are happy to keep buying every dip – for now.
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