United States of America

USD is strengthening against EUR and GBP but has ambiguous dynamics in pair ith JPY.

Investors continue to focus on comments from Fed Chairman Jerome Powell. Speaking yesterday at the annual meeting of the National Association for Business Economics (NABE), the official noted that the regulator will most likely continue to reduce the cost of borrowing by 25 basis points, although most experts expected an adjustment of ˗50 basis points at the next meeting. The official also reiterated his promise to do everything possible to achieve a sustainable decline in the pace of consumer prices to the 2.0% target, but at the same time prevent a significant increase in unemployment. Powell noted that the latest data on gross domestic product (GDP), which recorded its growth of 3.0% in the second quarter, give hope that domestic spending will remain at a significant level. However, future decisions by the regulator will, as before, depend on incoming economic data, so the US Fed may well change its position in favor of deeper monetary easing if pressure on the labor market intensifies.

Eurozone

EUR is weakening against its main competitors – GBP, JPY, and USD.

Today, September inflation data were published: the consumer price index fell from 0.1% to ˗0.1% MoM and from 2.2% to 1.8% YoY, falling below the target of 2.0% for the first time since 2021, while the core indicator was adjusted from 0.3% to 0.1% and from 2.8% to 2.7%, respectively. Positive dynamics increase the likelihood of further interest rate cuts by the European Central Bank (ECB), which was hinted at yesterday by the regulator's chairman Christine Lagarde and the head of the Bank of Finland Olli Rehn. The statistics on the Manufacturing PMI published today turned out to be weak: the indicator fell from 45.8 points to 45.0 points; however, it turned out to be better than the forecast of 44.8 points.

United Kingdom

GBP is weakening against USD and JPY but strengthening in pair with EUR.

Today, September data on the Manufacturing PMI was published (the indicator fell from 52.5 points to 51.5 points), as well as data on retail prices in large retail chains from the British Retail Consortium (BRC), which recorded the fastest dynamics in three years: the indicator fell from ˗0.3% to ˗0.6%. BRC head Helen Dickinson noted that ongoing geopolitical tensions, climate change and tax increases could hinder the trend of further decline in consumer prices.

Japan

JPY is weakening in pairs with EUR and GBP but has ambiguous dynamics against USD.

Investors are focused on the statements of new Prime Minister Shigeru Ishiba, who called on the Bank of Japan (BoJ) to maintain soft monetary policy "as a trend" as the government seeks to fully bring the country out of deflation, which has been observed over the past three decades, while the official acknowledged the regulator's right to make decisions independently but noted the importance of coordinating with parliamentarians. These comments make experts doubt that further consistent increases in interest rates will be possible. Also today, data on the Tankan largest enterprises sentiment index for the third quarter were published: the indicator for non-manufacturing companies increased from 27.0 points to 28.0 points with preliminary estimates of 30.0 points, and the index for manufacturers remained at 13.0 points instead of the expected 12.0 points.

Australia

AUD is strengthening against EUR and GBP but weakening in pairs with USD and JPY.

The manufacturing PMI fell to 46.7 in September from 48.5, confirming significant pressure on businesses from high Reserve Bank of Australia (RBA) interest rates and strong inflation. Retail sales rose by 0.7% in August, beating both the 0.4% forecast and the 0.1% in July, but August's construction data were ambiguous: total building permits fell by 6.1% against preliminary estimates of ˗4.3%, while the same indicator for single-family homes increased by 0.5%.

Oil

Oil prices are rising significantly today amid the escalation of the conflict in the Middle East.

After the start of Israel's ground operation in Lebanon, the participation of Iranian troops in military operations became possible, and the risks of disruptions in oil supplies from the region have increased significantly. Also today, sources told Reuters that the OPEC cartel and its allies are unlikely to change their policy at a meeting on Wednesday. Currently, members of the OPEC deal are cutting production by a total of 5.86 million barrels per day and may not begin to increase it until December. Also, during the day, investors are expecting the publication of weekly data on reserves from the American Petroleum Institute (API): they may decrease by 2.1 million barrels. In this case, prices will receive additional support.