Monday, September 23, 2024

Capital Markets: "European Currencies Start Week Softer, while the Dollar Bloc is Firm"

From Marc Chandler at Bannockburn Global Forex:

Overview: European currencies are trading with a softer bias to begin the new week. Soft preliminary PMIs appeared to be the main culprit but Australian's PMI disappointed ahead of tomorrow central bank meeting, and the Australian dollar's small gain leads the G10 currencies today. The Swedish krona is off around 0.75% before the central bank rate cut, which is expected later this week. There is some speculation of a 50 bp move. The Swiss National Bank is also expected to cut rates for the third time this year, and the franc is off about 0.1%. Most emerging market currencies are softer. China cut its 14-day reverse repo rate by 10 bp and an official briefing tomorrow is expected to result in other easing measures.

European benchmark 10-year rates are mostly 2-4 bp lower, and the German discount is widening. The 10-year US yield is little changed near 3.74%. Most Asia Pacific bourses advanced with notable exceptions in Hong Kong and Australia. After falling 1.4% before the weekend, Europe's Stoxx 600 is steady to slightly higher, despite the poor PMI reading. US index futures are firm. Gold reached a new record high a little above $2631 but has pulled back in Europe and is a hovering near $2620. November WTI rose by 4.8% last week, its best weekly performance since February. The Fed 50 bp rate cut and the escalating Middle East conflict are seen as the drivers. It is little changed today in a roughly $70.70-$71.70 range....

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