Iran’s supreme leader, Ayatollah Khamenei, is holding an emergency meeting of the Supreme National Security Council at his home compound, in response to Israel’s strike in Beirut that targeted the leader of Hezbollah, Hassan Nasrallah.

The latest reports suggest Nasrallah was killed but there have been many conflicting reports for hours.

The market seemingly isn’t too worried that Iran will get involved over the weekend. Perhaps the thinking is that they would have after the assassination in Beirut if so.

This article was written by Adam Button at www.forexlive.com.

Bloomberg is out with a report saying China is ramping up pressure on domestic companies to use domestic chip products rather than Nvidia chips.

Shares of Nvidia are down 3.5% and at a session low and weighing on the broader market. The Nasdaq is now down 0.6%.

The thing is, this exact same story was out in May.

This article was written by Adam Button at www.forexlive.com.

Headlines:

• Japanese yen surges as Ishiba wins leadership race to become next Japan prime minister
• Shigeru Ishiba wins LDP leadership race run-off, will be Japan’s next prime minister
• Weekly update on interest rate expectations
• BNP Paribas revises call and sees the ECB cutting rates in October now
• Goldman Sachs the latest to change their call on the ECB, now expects rate cut in October
• Spain September preliminary CPI +1.5% vs +1.9% y/y expected
• France September preliminary CPI +1.2% vs +1.6% y/y expected
• Germany September unemployment change 17k vs 12k expected
• Eurozone September final consumer confidence -12.9 vs -12.9 prelim
• UK September CBI retailing reported sales 4 vs -27 prior
• Fears of widespread damage as Hurricane Helene makes landfall in Florida

Markets:

• JPY leads, GBP lags on the day
• European equities higher; S&P 500 futures down 0.1%
• US 10-year yields down 0.4 bps to 3.784%
• Gold down 0.1% to $2,667.98
• WTI Crude up 0.2% to $67.82
• Bitcoin up 1.1% to $65,410

Shigeru Ishiba finally won Japan’s top job, as he won the LDP leadership race to become prime minister.

It’s been 12 years in the making after he lost out to then prime minister Shinzo Abe back in 2012. And when Sanae Takaichi led during the first round of votes, it looked like it might be another near miss again for Ishiba. But in the run-off votes, the odds turned in his favour and he came out as the winner.

As Takaichi led after the first round of votes, the yen fell hard with USD/JPY racing up to a high of 146.50. But the moment Ishiba was announced the victor of the run-off, that led to a sharp plunge in which the pair fell to 143.20. The low for the day then touched 142.76 before the pair is settling around 143.15 currently, down 1.1% on the day.

For some context, Takaichi had been one of the more vocal candidates and she strongly opposes the BOJ’s current plans for normalising monetary policy. She said that the rate hikes by the BOJ this year have been too quick for her liking and she would prefer rates to stay lower for longer.

Besides that, the larger focus in markets continues to stay on China and domestic equities ended the week with a flourish. The Shanghai Composite closed up by 2.9% and CSI 300 up by 4.5% today. And on the week, the former gained by nearly 13% and the latter by nearly 16% to its highest since October 2023. W Chinese stocks.

However, that didn’t quite lead to broader market moves today as compared to yesterday though.

The dollar held steadier throughout, with major currencies outside of the yen observing some light pushing and pulling during the session.

EUR/USD did fall to a low of 1.1125 as French and Spanish inflation numbers came in softer for September. That continued to rebuff expectations for an ECB rate cut next month, with the futures market showing ~94% odds priced in currently.

But with much of that already priced in, the pair bounced back a little to 1.1165 now – still down 0.1% on the day.

In the equities space, European indices are staying buoyed on ECB rate cut expectations. But the mood in US markets are less enthused with futures keeping marginally lower.

All eyes are on the US PCE price index next to add to the mix as market players look to wrap up the week.

This article was written by Justin Low at www.forexlive.com.

They had previously penciled in a 25 bps rate cut for December instead. So, they’re changing to October now. BNP and HSBC are the other two names on the list but I’d expect the rest of the houses to change up their calls in the next week or so as well. From earlier: BNP Paribas revises call and sees the ECB cutting rates in October now

Update: JP Morgan now also says that they see the ECB cutting rates starting from October.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

The USD remains under
pressure amid the aggressive market pricing for rate cuts and better global
growth expectations following the recent huge Chinese easing measures. It’s now
a battle between global growth supporting the risk sentiment and weighing on
the greenback and the aggressive rates pricing which could be scaled back if
the US data starts to pick up.

On the CAD side, the latest
soft Canadian CPI raised the probabilities for a 50
bps cut at the upcoming meeting as BoC’s Macklem hinted to a possibility of
delivering larger cuts in case growth and inflation were to weaken more than
expected. The market sees a 47% probability for such a move.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD dropped all the way back to the recent lows around the 1.3420
level. This is where the buyers stepped in to position for a rally back into
the 1.36 resistance.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into the 1.32 handle next.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price broke above the downward trendline today and stalled at the resistance
zone around the 1.35 handle. The buyers will want to see the price breaking higher
to increase the bullish bets into the 1.36 resistance, while the sellers will
likely step in around these levels to target a break below the 1.3420 level.

USDCAD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else to add but a drop below the most recent higher low at 1.3455
would likely see the bearish momentum increasing. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the Canadian GDP and the US PCE.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

They are the next one to shift towards this call, following from HSBC before this. Both had previously expected the ECB to cut rates in December instead.

Meanwhile, Deutsche Bank was also out in saying that the ECB needs to step up their pace of rate cuts here. But their call came right before this report from Reuters, which sparked further bets by market players in pricing in a rate cut next month.

This article was written by Justin Low at www.forexlive.com.

The headline reading is the highest since May, so that’s a welcome rebound in retail sales balance. At the same time, expected retail sales for October also moved higher to 5 and that is up from -17 in September. It is the highest reading for the expectations balance since April 2023. That’s a positive signal for UK retail sales activity as we look towards the year-end holiday period.

This article was written by Justin Low at www.forexlive.com.

Headlines:

• China’s Politburo reaffirms will lower RRR and implement forceful interest rate cuts
• Aussie bounces back today on upbeat China sentiment
• Is this the real turning point for Chinese equities?
• SNB cuts key policy rate by 25 bps to 1.00% from 1.25% previously
• SNB chairman Jordan: Swiss franc rise a major factor of inflation decline
• ECB October policy decision reportedly to be „wide open“
• Germany October GfK consumer sentiment -21.2 vs -22.5 expected
• Germany’s leading economic institutes sees GDP contracting again this year

Markets:

• AUD leads, USD lags on the day
• European equities higher; S&P 500 futures up 0.8%
• US 10-year yields down 0.9 bps to 3.771%
• Gold up 0.8% to $2,678.03
• WTI crude down 2.8% to $67.77
• Bitcoin up 1.3% to $64,330

China continues to hog the spotlight so far this week. The Politburo came out today to amplify their commitment towards all of the measures taken up this week and that spurred a surging rally in Chinese assets. The Shanghai Composite closed above the 3,000 mark for the first time since June, closing up by 3.6%. Meanwhile, the CSI 300 index ended up by 4.2% and is holding over 10% gains already this week.

That helped to push the likes of the aussie higher, with a more positive risk mood also flowing through broader markets.

AUD/USD moved up from 0.6840 to 0.6880 levels now, up 0.9% on the day. And as the session progressed, a softer dollar is also starting to permeate across other major currencies.

EUR/USD was weighed down by a report that the ECB is considering October to be a live meeting, with the pair falling to 1.1127 before trading back up by 0.2% now to 1.1155. GBP/USD held steadfast and is up 0.4% to 1.3380. USD/JPY tested the 145.00 mark in early Asia trading but is now dragged down by 0.4% to 144.23 on the day.

There was also the SNB policy decision and the Swiss central bank decided to cut its policy rate by 25 bps. It was a coin flip in terms of market pricing and the decision helped to cement slight gains in the franc, with traders still looking for roughly two more 25 bps rate cuts by the SNB by June next year. In that sense, the pricing outlook hasn’t changed that much.

Still, both USD/CHF and EUR/CHF fell with the latter down 0.2% to 0.9455 currently as the SNB getting outdone by the ECB even on their decision day.

In the equities space, it’s a more straightforward one as investors are buoyed by the vote of confidence in Chinese markets.

S&P 500 futures raced higher to be up 0.8% now while European indices are all holding over 1% gains on the day.

In the commodities space, gold is continuing to scale higher and is trading to fresh record highs now near $2,680. The train marches on there.

This article was written by Justin Low at www.forexlive.com.

The gains picked up during the handover from Asia to Europe, following comments from China’s Politburo here. That amplified Beijing’s commitment from all of the measures announced this week and also drove Chinese equities to surging gains on the day. S&P 500 futures were already up 0.3% at the time but extended that to 0.8% and have been consolidating a fair bit since.

Tech shares are staying buoyed overall with Nasdaq futures marked up by 1.4%. Adam highlighted Nvidia as being a standout here yesterday.

But so far, the main takeaway since last week is that investors are feeling confident about a soft landing in most major economies. And put together with a vote of confidence/faith in China this week, it is making for a more positive mood towards the end of September.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

The US Dollar came under
renewed pressure recently following the surprisingly weak US
consumer confidence report on Tuesday. The labour market data in the report
softened a lot and it generally leads the unemployment rate.

The market responded by
raising the probabilities for the Fed to cut by 50 bps in November to roughly
60%. The question now is whether this is just about the low hiring rate or
something worse. We will have to wait for the NFP report next Friday.

The focus is now on the
economic data. If we start to see an improvement, then Treasury yields will likely
rise and drive USDCHF higher. Conversely, if the data weakens significantly,
the market will start to worry about a recession and take USDCHF lower.

For the CHF, the SNB
today cut rates by 25 bps bringing the policy rate to 1.00%. The central
bank mentioned that it’s prepared to intervene in currency markets as necessary
and the new inflation forecasts were revised significantly lower signalling
more rate cuts to follow.

That was not enough for the
market to lead to a weaker CHF as the currency is now positive on the day.

USDCHF
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCHF remains stuck in the range between the 0.8555 resistance
and the 0.8400 support. The market participants will likely keep on playing the
range by buying at support and selling at resistance until we get a breakout.

USDCHF Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action. There’s not much to add here as
we will need to wait for a major catalyst or a breakout to see a more sustained
trend.

USDCHF Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the pair bounced strongly from the lows yesterday. If the price breaks
below the most recent higher low at 0.8465, we might see the bearish momentum
increasing as the sellers will look for a drop back into the support. The red
lines define the average daily range for today.

Upcoming
Catalysts

Today we get the latest US Jobless Claims figures, while tomorrow we conclude
the week with the US PCE report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.