EUROPEAN FX UPDATE: DXY remains firm post-FOMC. AUD lags post-Chinese PMI

USD: DXY +0.1%; 99.54

• DXY is mildly extending on the gains seen throughout the week, which have been triggered by a combination of the thawing in trade tensions between the US and China as well as the hawkish skew of Wednesday's FOMC policy announcement. On the latter, markets will be presented with further colour on how the meeting went down with Miran and Schmid set to offer a statement on their respective dovish and hawkish dissents. Bostic, Hammack and Logan are also due to speak. However, given their appearances will be at the "Evolving Landscape of Bank Funding" research conference, it remains to be seen how much focus there will be on monetary policy. Elsewhere, in the absence of official data releases, which means today's PCE report has been cancelled, attention will be on the Chicago PMI print at 13:45GMT. DXY has ventured as high as 99.66, stopping shy of yesterday's best @ 99.72.

EUR: EUR/USD U/C; 1.1566

• EUR is flat vs. the USD today but ultimately still softer following Wednesday's FOMC rate decision. Yesterday's ECB announcement had little follow-through into the EUR with the messaging from the meeting very much being one of the ECB being comfortable and in a "good place". If anything, the announcement had a mildly hawkish skew with Lagarde noting that downside risks to growth have been mitigated. All-in-all the bar to a near-term cut appears to be a high one. That being said, source reporting has signalled that policymakers are preparing for a December showdown on inflation and rates with some thinking that the 2028 inflation projection could warrant a rate cut debate, whilst others favour giving little weight to any small undershooting three years ahead. Comments this morning from the likes of Kazaks and Muller have echoed the tone struck by Lagarde yesterday. EZ inflation metrics for October showed headline HICP printing in-line with consensus @ 2.1%, core came in at 2.4% vs. exp. 2.3% and services nudged higher to 3.4% from 3.2%. EUR/USD sits towards the bottom end of yesterday's 1.1547-1.1637 range.

JPY: USD/JPY +0.1%; 154.20

• USD/JPY is fractionally firmer in a continuation of the upside seen this week, which has been brought about by the twin effects of a hawkish Fed announcement and dovish BoJ meeting, which saw policymakers offer no overt signalling of a December rate hike. Given the reticence shown by Governor Ueda during the press conference, strong Industrial Production and Tokyo Core CPI overnight has failed to offer any support to the beleaguered Yen overnight with markets unconvinced that the BoJ will be tightening policy in the near-term. The performance of the JPY is clearly a cause for concern for policymakers with Finance Minister Katayama attempting to jawbone the currency overnight, labelling recent moves in the Yen as "one-sided" and "rapid". USD/JPY has risen as high as 154.41 but stopped shy of yesterday's 154.44 peak.

GBP: GBP/USD -0.1%; 1.3141

• The GBP remains out of favour in what has been a bruising week for the pound following soft CPI metrics last week, declining food inflation this week and ongoing angst ahead of the November 26th budget. Further woes for the GBP are also stemming from the risks surrounding the position of UK Chancellor Reeves who is coming under fire for putting her family home up for rent without obtaining the required licence. Markets will recall back in July when speculation mounted over Reeve's position, significant volatility was seen in back-end UK yields. However, the latest saga appears to be of a different nature. Back then, the inference was that Reeves could be removed and replaced by someone who could potentially water down hee fiscal rules. This time around, Reeve's position is more at risk due to a political scandal and any potential replacement would be more likely to carry on with the plan outlined by Starmer and Reeves. All of this is taking place in the run-up to next week's BoE policy announcement and MPR. Markets assign a circa 32% chance of a rate cut. Cable has delved as low as 1.3126 but is holding above yesterday's 1.3116 trough.

Antipodeans: AUD/USD -0.2%; 0.6539. NZD/USD -0.4%; 0.5720

• Both sit near the foot of the G10 leaderboard. After an encouraging start to the week for AUD on account of upbeat reporting ahead of the Trump-Xi meeting and hot Q3 inflation metrics, the currency has since faltered in the wake of the hawkish FOMC and soft Chinese PMI metrics overnight. Attention now turns towards next week's RBA meeting, whereby odds of loosening have dwindled on account of the aforementioned price data with a 25bps reduction now just priced @ 8%. AUD/USD has delved as low as 0.6534 but is just about holding above yesterday's trough @ 0.6532. NZD/USD has extended further south of yesterday's base with a current session low @ 0.5715.

31 Oct 2025 - 10:15- ForexData- Source: Newsquawk