United States of America

USD weakens against EUR, JPY, and GBP.

In September, the number of issued building permits fell by 2.9% to 1.428M, while the volume of new home construction fell by 0.5% to 1.354M: the sector, remaining under pressure from high interest rates of the US Fed, remains resilient, which, along with the strengthening of the labor market and a less significant than expected slowdown in inflation, gives experts reason to expect a more cautious position from regulators regarding further easing of monetary policy. Currently, most market participants are counting on two more adjustments to the cost of borrowing, in November and December, by –25 basis points. However, the Fed may limit itself to only one interest rate cut.

Eurozone

EUR is strengthening against USD, weakening against GBP, and has ambiguous dynamics against JPY.

Traders focus on the results of yesterday’s meeting of the European Central Bank (ECB), during which officials adjusted the cost of borrowing for the third time this year. The key rate changed from 3.65% to 3.40%, the marginal rate from 3.90% to 3.65%, and the deposit rate from 3.50% to 3.25%. In subsequent comments, officials noted that inflation is slowing and will reach the target level of 2.0% next year, and the region’s economy will avoid recession, growing by 0.8% in 2024 and 1.3% in 2025. However, most analysts and investors fear that these forecasts will not come true, and the Eurozone will face an economic downturn to combat which financial authorities should cut the interest rate not by 25 basis points but by 50 basis points. According to Reuters, some officials at the department have spoken out in favor of abandoning the promise of a long-term tight monetary policy, as inflation pressures may be lower than expected but have not received universal support.

United Kingdom

GBP is strengthening against EUR, JPY, and USD.

In September, the volume of UK retail sales increased by 0.3% MoM, instead of the expected 0.3% decline, and by 3.9% compared to 3.2% YoY, with the greatest increase in demand for non-food items, household appliances, and computers. Experts note that despite households’ concerns about possible tax increases in the budget due on October 30, these concerns have not yet affected the determination of citizens to maintain high spending.

Japan

JPY is weakening against GBP, strengthening against USD, and has ambiguous dynamics against EUR.

The September national consumer price index fell from 0.5% to –0.3% MoM and from 3.0% to 2.5% YoY, while the core indicator fell from 0.5% to –0.3% and from 2.8% to 2.4%, respectively, due to the government’s launch of energy subsidies for households. The statistics reduce the likelihood of further monetary policy tightening by the Bank of Japan this year, whose wait-and-see stance was reiterated today by Governor Kazuo Ueda, who said the country’s economy was recovering at a moderate pace and core inflation might reach the 2.0% target soon. However, the official noted that risks remain high due to global economic uncertainty.

Australia

AUD is strengthening against USD and has ambiguous dynamics against EUR, JPY, and GBP.

The market is influenced by several opposing factors. The positive dynamics are facilitated by the September statistics from the labor market, which reflected an increase in employment by 64.1K, higher than both the forecasts of 25.2K and 42.6K earlier, while unemployment remained at 4.1% instead of the expected 4.2%, which reduces the likelihood of interest rate adjustments by officials of the Reserve Bank of Australia (RBA) this year. On the other hand, in the third quarter, the gross domestic product (GDP) of China, the country’s main trading partner, increased by 0.9%, while experts expected 1.0%, which may indicate a further slowdown in the PRC economy and a reduction in exports, putting pressure on the Australian dollar.

Oil

Oil prices are correcting downwards amid a slowdown in China’s economic growth and a weakening of the risks of a reduction in the supply of Middle Eastern raw materials to the market since Israel, despite repeated threats, has not attacked Iranian infrastructure. The economy of China, the world’s largest fuel importer, grew at its slowest pace since early 2023 in the third quarter, increasing by 0.9%. However, September consumption and industrial production figures exceeded forecasts, limiting the negative dynamics of oil prices. In addition, the asset is supported by data on reserves from the Energy Information Administration of the US Department of Energy (EIA): oil fell by 2.191M barrels, gasoline – by 2.201M barrels, and distillates – by 3.234M barrels.