Markets are USD-focused, with the yield on 10-year Treasuries advancing, currently at 4.24%. We see USD/JPY open above 152, Cable open below 1.30, and EUR/USD testing support at 1.0780/1.08. Asian equities were flat, with declines in Japan and gains in South Korea. Mainland Chinese shares were outliers, rising after a top government-linked think tank called on authorities to issue 2 trillion yuan ($281 billion) of special government bonds to help create a market stabilization fund.
The day ahead has a full calendar: we have a Canadian rate decision, Eurozone consumer confidence, U.S. existing home sales, the Fed’s Beige Book, and earnings from Boeing, Tesla, and Deutsche Bank, to name a few. Domestically, it's worth noting EUR/GBP. The August rate cut decision was tight, with a slim 5-4 majority, and not all MPC members are as dovish as Governor Bailey. Last week, the release of September UK headline CPI inflation undershot market consensus, recording its lowest level since 2021 at 1.7% y/y. While this strengthens the chances that the BoE will cut rates at its November 7 policy meeting, potential barriers to an accelerated pace of rate cuts remain. UK services sector inflation remains elevated at 4.9% y/y. Chancellor Reeves announces her budget on October 30, and an expansionary budget could support the view that the BoE will struggle to accelerate away from a moderate/quarterly pace of rate cuts. However, given the poor state of UK public finances, expansion measures will be tough. In contrast, the pace of ECB rate cuts will continue, making me think that EUR/GBP 0.8280 support will give way soon.
In other markets, Bitcoin fell 0.5% to $67,154.1, Ether fell 0.6% to $2,616.64, West Texas Intermediate crude fell 0.1% to $71.64 a barrel, and spot gold opens at $2,752 per ounce.
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