Price action on Friday was fairly subdued, with USD lower overall, EUR higher, and GBP marginally lower as well. Data points from the US threw no major surprises, with the Core PCE inflation number falling as expected to 3.7%. CNN reported there was significant progress in negotiations on hostages held by Hamas, which caused some risk appetite to come into the markets causing US equities to rise towards the end of the day. However, markets fell later in the evening after Israel announced they were expanding ground operations in Gaza.
* Daily move - against G10 rates at 7:30am, 30.10.23
** Indicative rates - interbank rates at 7:30am, 30.10.23
Markets went risk-off late on Friday with news that Israel’s ground forces were expanding operations into Gaza. However, the view so far is deemed as one of relative relief with forces advancing more cautiously than initially thought. Oil is lower as a result and equity future are higher as well. This week's headline events will be policy decisions from the Bank of Japan, Federal Reserve, and Bank of England with most economists expecting current policy to remain unchanged. We’ll get a read on the prospect of eurozone stagflation tomorrow, with the release of the region's inflation and GDP numbers - ahead of that we have Germany's readings today.
We will also be getting revisions to recent PMI numbers across Europe, US, and Asia, and the week finishes with US job numbers. And of course, developments in the Middle East will be key. For the time being, the FX space looks likely to favour USD, unless we get some upside surprises on China PMI numbers and/or we see action from the Bank of Japan in tweaking their monetary policy.
Chart of the day
The German economy continues to be the loss leader within the eurozone economy, with analysts expecting further contraction of the German economy for the 3rd quarter of this year – which will mark the 4th consecutive month that the German economy has been contracting.
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