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1. In contrast to the preceding two months, the US Dollar exhibited a fluctuation between 105.3 and 107.3 due to a multitude of economic factors causing it to veer off its established path. Initially, it showed slight weakness owing to mixed PMI data, with improvements in manufacturing offset by contracted order growth in services, even though strong job openings and an unexpectedly high NFP report balanced this out with moderating wage growth. Mid-month saw the rise of inflationary pressures and geopolitical tensions, but this newfound strength was tempered by a decline in consumer sentiment. The Dollar later regained ground, supported by positive economic data like robust retail sales and a tightening labor market, although caution emerged following Fed Chair Powell's speech. The Dollar experienced volatility, initially disrupted by Bill Ackman's comments, but was ultimately lifted by strong economic indicators, including favorable manufacturing and services PMI, advance GDP, and Core PCE data. However, unemployment claims surged, signaling labor market uncertainty, and consumer sentiment dipped due to concerns about equity market declines and financial outlook.
2. Last month, the Euro's performance against the US dollar displayed a range of movements and eventually closed flat at $1.05. The Euro managed to halt its decline and closed near $1.06 due to improvements in Purchasing Managers' Index (PMI) data and a resilient economic outlook in Europe. Furthermore, driven by positive economic sentiment and moderating inflation, euro extended its gains. Despite the decline in flash PMIs and the ECB's decision to keep rates unchanged, the Euro closed on a positive note, supported by signs of recovery among economic providers. However, looking ahead, the anticipation of potential rate cuts and economic challenges may introduce turbulence to the Euro's upward trajectory.
3. The British pound consolidated against the US dollar, ranging between highs of $1.23 and lows of $1.20, to close near $1.21. Like euro, the pound halted its decline, supported by a positive final services PMI survey, which exceeded expectations. However, we quickly see the pound lose ground as BoE's Governor Bailey expressed a subdued economic outlook and emphasized the need for monetary policy restraint. Conflicting economic data left the market uncertain about future rate decisions, despite signs of inflation and challenges in the labour market. Ultimately, the pound slipped due to a surge in unemployment claims and contractionary PMI figures. Investors, now, eagerly anticipated the release of BoE's official bank rate, with expectations of a rate pause at 5.25%.
4. Over the past month, the Japanese yen exhibited a dynamic performance against the US dollar and closed near 151.60. It initially strengthened to close at 149.30, driven by positive business condition surveys and improving household spending indicators, signaling a brighter economic outlook. However, in the following weeks, the yen faced depreciation as a Bank of Japan (BOJ) member and a former Japanese currency diplomat downplayed policy normalization expectations and affirmed that Japan was unlikely to intervene to counteract the yen's decline. Leading up to BOJ’s monetary policy announcement, following a strong Tokyo core CPI figure, the yen strengthened as speculation pressures tweaks to BOJ's monetary policy as traders anticipated potential adjustments in bond yields. However, in recent BOJ’s monetary policy meeting, the BOJ has now adopted a more flexible approach to managing 10-year government bond yields, moving away from a previous commitment to daily purchases at a 1% yield level as it is now seen as a “reference rate”. The BOJ, represented by Ueda, remained cautious, seeking concrete evidence of wage growth and price stability before considering abandoning the negative interest rate policy.
5. Over the past month, the Aussie closed lower against the dollar at $0.63. RBA's decision to maintain interest rates, potentially widening interest rate differentials compared to the US. However, the Aussie made modest gains as the RBA signaled a more hawkish stance due to concerns about inflation and the positive wealth effect from rising house prices. This sentiment was echoed in RBA Governor Bullock's speech, emphasizing inflationary risks, despite employment figures falling short of estimates. Fueled by the recent strong inflation data, market participants are eagerly anticipating and forecasting a more hawkish approach from the RBA, which could potentially lead to a strengthening of the aussie in the near future. Over the past month, the loonie weakened sharply against the US dollar, closing at 1.38, as BoC pauses rates and consumer spending falls. Driven by a surge in US Treasury yields triggered by the Non-Farm Payrolls (NFP) report, it overshadowed positive Canadian PMI and labour market data. Fortunately, losses were limited from rising crude oil prices due to geopolitical tensions. However, as inflation figures moderated and retail sales remained lackluster, it led to the BoC's decision to maintain overnight interest rates at 5.0%, recognizing widespread inflation increases driven by surging oil prices. The kiwi displayed a series of fluctuations against the US dollar to close the month lower near $0.58. With the RBNZ’s decision to maintain the official cash rate at 5.50%, it set the tone for the kiwi’s slide in October. Such weakness was reinforced as the q/q CPI data revealed a growth of 1.8%, slightly below expectations, potentially reinforcing the likelihood of a rate cut in the first half of 2024, despite core inflation exceeding the RBNZ's target. Throughout the month, interest rate decisions and inflation data were key drivers of the Kiwi's movements, with potential rate cuts in 2024 weighing on market sentiment.
6. Gold witnessed substantial price fluctuations, exceeding $2,000 per ounce, fueled by mounting geopolitical tensions in the Middle East, yet counterbalanced by indications of the US economy's strength and expectations of enduring elevated interest rates to close at $1980 an ounce. The initial dip in gold prices was a response to a stronger US dollar and the expectation of enduring high rates. Nonetheless, potential upward momentum materialized with growing geopolitical tensions between Israel and Palestine, with gold emerging as a safe-haven asset, reminiscent of its behavior during the Russia-Ukraine conflict in 2022. Vigilance regarding potential escalations in the Israel-Palestine conflict and the involvement of major economies remained a key aspect of gold's recent price dynamics.
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