EUROZONE DATA: Sep Flash PMI: Another Solid Month Of Activity, Inflation Higher
The Eurozone-wide September flash PMI confirms another solid month of activity, extending resilience in the face of the US-Iran war energy shock. Both services and manufacturing components contributed, though the former was the main upside surprise versus consensus. Taken alongside hawkish developments inflation components, there is little to push back on the hawkish rhetoric employed at the ECB’s September decision. Questions around the timing of future hike/hikes remains though.
- The data has helped front-end EUR rates away from early highs, with ERM7 now 2.5 ticks below yesterday’s settlement levels at 96.540 (vs a high of 96.610 earlier).
Key notes from the release (focusing on ex-France and Germany where appropriate)
- “The rest of the eurozone as a whole registered a solid but softer rise in output.”
- “The picture for new orders at eurozone companies was similar to that for business activity, with growth recorded for the third month running in September.”
- “The rest of the euro area as a whole saw staffing levels increase modestly”
- “Inflationary pressures intensified in September, with both input costs and output prices increasing at the sharpest rates in four months.”…. “output prices increased at sharper rates in both monitored sectors, as well as across Germany, France and the rest of the eurozone as a whole”
- “While rates of expansion in output and new orders quickened in September, confidence in the year-ahead outlook for output waned again during the month and remained relatively muted”
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FOREX: USD Off Lows as UKMTO Reports Fresh Incident Off Saudi Arabia
- Greenback edges to the best levels of the day, as the minor tailwind from crude prices helps underpin the move. This drags EURUSD a little further away from the 1.1711 cycle high, met on both Thursday and Friday last week, prompting the price to further chip away at Wednesday's bullish candle.
- Despite bond and equity prices remaining pretty stable on the UKMTO headline, these moves go to show that FX can remain responsive to any pick-ups in middle-east risk.
- Of more interest may be the resilience in USDJPY over the past few weeks, extending the recovery off the intervention low as the pair remains in buy-the-dip mode. The next support to watch is 156.68, the Aug 7 low. Clearance of it would expose 155.23, the Aug 3 low and bear trigger. But for now, a firm resistance zone between 159.59 - 160.19 remains intact - the area between the 20- and 50-day EMAs. A breach of it would be bullish.
IRAN: Will Use Full Capacity To Counter U.S. Sanctions
Mehr News notes that the spokesman for the Iranian Foreign Ministry says that "Iranians, due to their rich civilization, say that "testing the tried and true is a mistake," but in the American region, testing the tried and true is justified. Trying methods that have already proven unsuccessful will not yield different results. They are well aware that the effects of these sanctions are felt by citizens. Iran certainly utilizes all multilateral capacities to counter sanctions."
