BoJ Drives APAC Volatility
The greenback weakened over the past 24 hours, with the USD index falling to its lowest level since 22 October, following Thursday’s Bank of Japan decision which indicated the BoJ was less likely to raise rates than anticipated. The BoJ cited concerns about “market volatility” as a reason to maintain interest rates, resulting in the USD/JPY dropping 0.8% from three-month highs.
The US dollar weakened across most markets, with the EUR/USD rising 0.3%, USD/CHF falling 0.3%, and AUD/USD increasing 0.1%. However, the British pound weakened as markets continued to react to this week’s UK Budget, while the CAD fell after a speech by Bank of Canada Governor Tiff Macklem suggested the possibility of further local rate cuts.
Weak Hiring? US Jobs Due
All eyes are on today’s US jobs report and whether a significant miss or beat will affect Fed rate expectations and broader markets. With the US election just days away, traders might prefer to stay on the sidelines. The US dollar is slightly softer ahead of the risk event but is set to close October with around a 3% gain against a basket of major currencies, marking its strongest monthly rise in over two years.
US job growth is expected to slow from the recent uptick seen in September. The October figure is anticipated to be slightly above 100k, less than 50% of the previous 254k figure. Bloomberg Economics forecasts a negative -10k print due to the hiring slowdown related to the hurricane season.
The S&P purchasing manager indices exceeded expectations across the board. It is now up to the more significant ISM to show similar results. Consensus expects a slight improvement in October as regional Fed PMIs have recently painted a somewhat positive picture.
Sterling Still Whirling
The volatility in UK gilts and the British pound is far less severe than during the run-up and aftermath of the infamous 2022 mini-budget. However, the market reaction to the Labour Party’s Budget has still been quite negative.
The UK 10-year gilt yield surged above 4.51%, the highest in a year, while the fall in GBP/USD accelerated to $1.29. This kind of response from financial markets is not what a Chancellor wants to see after a budget, especially with numerous risk events looming in the near future.
The US election, Fed, and Bank of England decisions on interest rates next week all have the potential to exacerbate what is already a delicate situation for UK assets.
