KRW: USD/KRW Off Highs, But Uptrend Still Intact, NPS Meeting May Be Today
Spot USD/KRW sits little changed in the first part of Monday dealings, we were last near 1471. Friday intra-session highs came in at 1477.4, levels last seen in April of this year. The pair remains in an uptrend, with some distance until downside support, with the 20-day EMA back near 1454.6. For Friday's session, moving off intra-session highs was aided by strong yen and CNH levels, while risk appetite was also better in the equity space (Fed easing expectations for Dec also rose post NY Fed Williams speak).
- The early tone to local equities is firmer, the Kospi up 0.15%, but we are still under 3900 in index terms (and well off earlier highs). Recent lows aren't too far away (3838.46), while last week there was $2.3bn in net equity outflows, with just over $2bn occurring on Friday. Broader tech equity trends remain uncertain, with last week's sharp reversal post Nvidia results pointing to uncertainty around the chip/AI outlook.
- Note that onshore media is reporting that the FinMin, BOK and National Pension Service may hold an FX meeting today, per DongA (via BBG). This is aimed at stabilizing FX supply/demand, with NPS's hedging strategy a likely discussion point.
- The local data calendar is empty today, with Oct retail sales due out some stage this week, while consumer confidence prints tomorrow. On Thursday the BoK decision is due with no change expected. Focus will be on the policy outlook and whether this shifts back to neutral (last meeting the majority of the board were still in favour of easing rates further).
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FED: MNI Fed Preview - October 2025: QT, Or Not QT
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
USDCAD TECHS: Corrective Pullback
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 High Oct 16 and the bull trigger
- PRICE: 1.4016 @ 16:33 BST Oct 24
- SUP 1: 1.3979/3907 20- and 50-day EMA values
- SUP 2: 1.3829 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
USDCAD has pulled back from its recent highs. The trend condition is bullish and a move lower is considered corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out, scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support lies at 1.3907, the 50-day EMA. Support at the 20-day EMA lies at 1.3979.
