FOREX: Weaker USD Not Sustained, A$ Outperforms Post, AUD/JPY Eyes 101.00
Softer USD sentiment from earlier proved to be short lived. The USD BBDXY index was last back around 1211.6, up from earlier lows near 1209. USD/JPY has rebounded nearly 100pips from earlier lows. Yen rallied earlier in the first part of trade as US Tsy Bessent encouraged the Japan government to let the BoJ deal with higher inflation. USD/CNH is up from fresh lows as well. AUD/USD is trying to break above 0.6600 post the stronger Q3 CPI prints, which sent local yields surging. The AUD/NZD is higher, holding above 1.1400 post the Q3 Australian CPI beat.
- USD/JPY got lows of 151.54, (which was still above the 20-day EMA) but last tracks near 152.50/55 (the bull trigger at 153.27 remains intact). US Tsy Bessent's earlier remarks aided the yen, as he stated the Japan government should give the BoJ the policy space it needs to keep inflation anchored and excessive FX volatility curbed. We have rebounded as US equity futures tick higher, as Trump said he will discuss Nvidia chips with China President Xi. US Tsy yields are little changed ahead of the FOMC later.
- AUD/JPY demand could also be a factor, the pair above 100.60, eyeing a test near 101.00. The A$ has outperformed in the G10 space post the Q3 CPI beat. Easing risks priced by the market for year end are very modest. AUD/USD is eyeing a test around 0.6630, which marked earlier Oct highs. AU-US yield differentials are firmer, the ACGB 3yr yield up 12bps today. NZD/USD is little changed, holding close to 0.5780.
- USD/CNH has recovered some ground, with the market arguably looking for a lower USD/CNY fix today (relative to mkt forecasts) to aid fresh downside. The pair was last back near 7.0980, with onshore spot also steady around 7.1000, another limit on CNH gains.
- US President Trump expressed confidence in a US-China deal, with potentially lower tariff rate tied to fentanyl. Headlines also crossed of China making some soybean purchases from the US in this past week.
- The Fed and BoC decisions are later Wednesday and both are expected to cut rates 25bp. US September inventories and pending home sales as well as Q3 Spanish GDP and UK September lending print.
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EURGBP TECHS: Sights Are On The Bull Trigger
- RES 4: 0.8835 High May 3 2023
- RES 3: 0.8800 Round number resistance
- RES 2: 0.8769 High Jul 28 and the bull trigger
- RES 1: 0.8751 High Sep 25
- PRICE: 0.8725 @ 06:44 BST Sep 29
- SUP 1: 0.8662/8597 50-day EMA / Low Aug 14 and the bear trigger
- SUP 2: 0.8562 50.0% retracement May 29 - Jul 28 upleg
- SUP 3: 0.8540 Low Jun 30
- SUP 4: 0.8514 61.8% retracement May 29 - Jul 28 upleg
EURGBP is trading closer to its recent highs and a bullish theme remains intact. The latest recovery paves the way for an extension towards the bull trigger at 0.8769, the Jul 28 high. Clearance of this level would strengthen the bull theme. Support to watch lies at 0.8597, the Aug 14 low. A breach of this level would instead reinstate a recent bearish threat. First support is 0.8662, the 50-day EMA.
CHINA: Country Wrap: China Stoking Domestic Demand
Market Summary: The Hang Seng is up +1.40%, the CSI 300 +0.47%, Shanghai up +0.13% and Shenzhen up +0.86 whilst the Yuan Reference Rate at 7.1089 Per USD; Estimate 7.1265. Bonds are unchanged with the 10-Yr at 1.88%
- China is intensifying efforts to expand domestic demand, with service-related spending emerging as a key growth driver. In response, regulators have rolled out consumer finance measures designed to support consumption upgrades and encourage household spending. Earlier this year, the National Financial Regulatory Administration directed financial institutions to broaden their consumer finance offerings as part of a wider push to stimulate demand. (source China Daily)
- Rebound in industrial profits signals stabilization of economy. China's economy is showing signs of stabilizing amid robust policy measures and notable industrial recovery, analysts said on Sunday. They expect the recovery momentum to extend into the fourth quarter, keeping the country on course to meet its annual growth target of around 5 percent, with authorities likely to ramp up fiscal and monetary measures to counter persistent headwinds of still-weak demand and external uncertainties. Policy options on the table include issuing ultra-long-term special treasury bonds, faster issuance of local government special bonds, and potential monetary easing to lower financing costs and channel credit into technology and green sectors, they added. (source China Daily)
EUROZONE T-BILL ISSUANCE: W/C 29 September
France, Greece and the EU are due to sell bills this week. We expect issuance to be E11.6bln in first round operations, down from E21.6bln last week.
- This afternoon, France will look to issue up to E7.9bln of 14/15/27/49-week BTFs: E2.6-3.0bln of the new 14-week Jan 7, 2026 BTF, E0.1-0.5bln of the 15-week Jan 14, 2026 BTF, E1.6-2.0bln of the 27-week Apr 9, 2026 BTF and E2.0-2.4bln of the 49-week Sep 9, 2026 BTF.
- On Wednesday morning, Greece will look to come to the market with E500mln of the 13-week Jan 2, 2026 GTB.
- Finally on Wednesday, the EU will look to sell up to E1.0bln of the 3-month Jan 9, 2026 EU-bill, up to E1.0bln of the 6-month Apr 10, 2025 EU-bill and up to E1.5bln of the new 12-month Oct 10, 2026 EU-bill.
