From Marc Chandler at Bannockburn Global Forex:
The surge in US rates continues to underpin the greenback. The market anticipates a more aggressive tightening cycle than the Federal Reserve’s recent Summary of Economic Projections suggested. The Atlanta Fed’s GDP tracker points to 5.1% growth this quarter, which would surely surpass China’s. Treasury Secretary Bessent announced a two-month tariff truce extension with China, which is a little shorter than had been floated. Hopes of a settlement in the Middle East were dashed by Iranian comments threatening new escalation if the US or Israel strike again. Speculation that the US will impose a ban on diesel exports continues to unsettle the market.
Three G10 central banks met today. Norway’s Norges Bank increased the deposit rate by 25 bp to 4.5% and kept the door open to additional moves. The swaps market is pricing in another hike late this year or early next year. Sweden’s Riksbank kept its policy rate at 1.75% but indicated a hike this year was likely. The swaps market has around a 90% chance discounted for the next meeting in early November. The Swiss National Bank maintained its zero-policy rate, dropped the language in its statement that threatened “increased willingness” to intervene to sell the franc, and tweaked up its inflation forecasts.Prices
G10
• US rates jumped after the stronger than expected preliminary September PMI and that succeeded in pushing the euro to $1.1370, a new low since July 28. The losses were extended to almost $1.1360 in Europe. It consolidates below $1.14, where options for 1.2 bln euros expires today. Indeed, the last session that the euro did not trade above $1.14 was on June 25, the day after it recorded the low for the year (~$1.1325). The July low was set slightly below $1.1355....
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