USD
Hurricane Milton and FOMC meeting minutes are the two key stories front of mind to kick off the day. The former made landfall overnight, but weaker and further south than anticipated, meaning that the worst-case outcome may have been avoided, albeit still with significant damage. The latter, meanwhile, met our expectations. The minutes noted that some participants preferred a smaller move last month, while “a few participants also added that a 25-basis point move could signal a more predictable path of policy normalization”. This is a clear signal that 25bp cuts are likely to be the norm moving forward, consistent with market pricing and our own base case. That said, the major focus today will be US inflation data published at 13:30 BST. Markets expect a 0.2% MoM core inflation print, which if realised, should see the broad dollar trading sideways. That said, where there are risks, we see them as skewed toward a marginal upside beat, an outcome that could entail another round of greenback upside.
EUR
Markets continue to eye a dovish turn from the ECB next Thursday, with only a handful of second and third-tier eurozone data releases to chew on ahead of the weekend. All told, this leaves swap implied expectations projecting a succession of 25bp cuts, with 4.8 projected to June 2025. We think this pricing could get a little more aggressive considering the bloc’s grim economic outlook, suggesting that risks remain skewed toward further euro downside in the short-to-medium term. Whether or not this comes to pass, however, will likely have to wait for the ECB, making it a next week problem for traders. For today though, US CPI is the key for EURUSD fortunes, with a break below 1.09 a possibility this afternoon.
GBP
The BoE credit conditions survey is the key event of note for sterling today. Given the solid domestic growth outturns since the start of the year, and our view that momentum through Q3 is likely to remain supportive, we anticipate a broadly positive report later this morning. If we are right, this should offer a boost to sterling, which continues to trade below our short-run forecasts. As we see it, political risks ahead of the October budget are likely overstated, while the BoE is likely to remain more hawkish than other peer central banks, both of which would favour upside for the pound. While the first of these is unlikely to be resolved before month-end, the second view is likely to garner some support this morning, suggesting that GBP risks are skewed to the upside in advance of this afternoon’s US CPI report.
CAD
While tomorrow’s jobs data remains the key domestic risk event of note for loonie traders this week, more immediate USDCAD price action is likely to be determined by this afternoon’s US CPI release. The pair continued its charge higher through Wednesday trading, in line with broad dollar moves. Given our view on US CPI, we see further upside risks to the pair, with the potential to hit 1.38 by the weekend, not out of the question.
This content was originally published by our partners at Monex Europe.