EM LATAM CREDIT: Argentina: Planned Issuance USD 4Yr BONAR – Positive

• Despite a more stable session for sterling on Wednesday, EURGBP has been consolidating its position back above the 0.8800 handle, with dips remaining well supported following recent bullish developments. We touched on EURGBP vols in our earlier bullet here: https://mni.marketnews.com/3WEIaFK
• The breach of significant resistance at 0.8769 has bolstered the momentum for the cross, and this week’s retest of the breakout and subsequent bounce maintain the optimistic short-term view as both the BOE decision and budget approach. Topside targets for the broader rally include 0.8835 (held overnight) and 0.8875, the April 2023 high.
• In addition to BNP’s view above, other analysts see further upside risks for EURGBP:
• Rabobank expect the pound to remain on the back foot heading into tomorrow’s meeting given speculation of a dovish tilt. Bearish momentum continues to weigh heavily on cable in view of the USD’s recovery and Rabo retain the view that EURGBP will edge slowly higher into 2026.
• MUFG said that the pound is likely to continue to underperform on the expectations of a harsh budget, while SocGen highlighted that should tighter fiscal policy without spending restraint be the chosen cure to the UK economy’s woes, they can’t see anything GBP-friendly in that.
• BBVA also stated that Reeves’s comments reinforced the difficulty of consolidating the UK’s public finances without jeopardising an already fragile recovery, a mix that continues to pose downside risks for the GBP.

ADP is expected to point to some stabilization in private payrolls after recent job losses, aided by the new publication of a weekly series albeit with some questions over how well it chimes with the regular monthly report and revisions prospects. 

• Bloomberg consensus estimates ADP private payrolls growth of 30k in October for today’s release at 0815ET.
• Whilst still subdued, it would at least mark an improvement from the surprisingly weak -32k in September and -3k in August.
• Month to month readings can be volatile but there has been a clear downtrend in ADP jobs growth since the late 2024. The three-month average has slowed from 206k in Nov 2024 to 23k in September having moderated in every month bar one since then.
• The data are prone to revisions but currently suggest that only the largest firms with 500+ employees avoided job losses back in September.
• ADP last week surprisingly started publishing a weekly “Pulse” report, which pointed to private payrolls growth of 57k over the course of the four weeks ending Oct 11, reported as an average weekly increase of 14.25k.
• There are question marks as to how well this weekly series correlates with the longer-standing monthly report. For instance, September and August readings currently line up well for weeks broadly matching the reference period for the monthly report but July implies there was a sizeable deterioration following the reference period (although we don’t have weekly data going back far enough at present). We’ll watch how both series are revised over time.
• The weekly pulse will be released every Tuesday aside from weeks when the monthly report comes out in its usual spot on Wednesday. 

BNP Paribas write that they doubt cross-border flows from UK investors will provide a material support for GBP ahead, and maintain a bearish outlook over the medium-term. As such they see upside risks to their EURGBP 0.88 year-end 2026 forecast.

• On record retail investor flow into US equities, they see little reason for any FX effect as a result of repatriation - even with government policy looking to incentivise domestic investment. They see $7bln YTD buys of US equities from UK retail - a record high.
• They also contrast the UK with other regions, in that FX hedging from pension funds is unlikely to be meaningful for the FX rate. They estimate UK pension funds hold $900bln in US assets, and estimate a higher FX hedge ratio would only result in $52bln of USD sales - half of that seen for the Eurozone (and on par with smaller Australian holdings).
• We wrote yesterday that spot weakness is calling into question the sell-side view for GBPUSD. Prices are now considerably below consensus for year-end (1.35) and a soft finish to the year will likely trigger a phase of expectation revisions among the sell-side, particularly if the BoE proceed with a BoE rate cut this week - against median consensus, but a growing view among analysts. The pair has now retraced 38.2% of the year's rally, making 1.2945 a key support headed through the end of the year.