USD
A choppy session for the dollar led FX market price action on Tuesday despite the DXY index ultimately finishing little change. Perhaps the most significant point of note in our eyes, however, was a JOLTs job openings reading, which significantly undershot expectations. Economists had looked for a circa 8000k print for September. What they received was an almost 200k downward revision to the August reading, and 557k undershoot relative to expectations. That said, while concerning on the surface, the devil is in the details. Almost all the undershoot once accounting for August’s downward revision, stemmed from Hurricane affected states. As such, we are inclined to discount yesterday’s weak print, at least for now. But, if we are right, then this could be a harbinger of what is to come later in the week too. Expectations are for hurricane disruption to weigh on payroll additions for October – but taking a signal from job openings data, this could well be by more than markets current project, suggesting risks of a downside miss later this week that are likely to weigh on the dollar.
EUR
While EURUSD ultimately ended Tuesday flat, today should be more consequential for the pair. National GDP, CPI, and labour market readings are all due out of the eurozone today. This morning has already seen French GDP figures for Q3, which modestly exceeded expectations. Even so, this looks like an Olympics effect to us, and a 0.1pp beat that delivers 0.4% QoQ growth is hardly a reason to start popping Champagne corks just yet. Likely the French economy will drop back in Q4, especially if recent PMI indicators are to be believed. That said, upside beats for both CPI and GDP out of Spain are garnering more meaningful attention from traders. With no Olympic distortions to account for, markets are seemingly more inclined to extrapolate from these readings, pricing a more hawkish ECB, with the euro stronger this morning as a consequence.
GBP
The big day is finally here for the Chancellor. Rachel Reeves will deliver her first budget, and possibly the most consequential UK fiscal event in more than a quarter of a century, just after 12:30 GMT. In terms of what to expect, a tweak to the fiscal rules looks all but guaranteed. This should open up much more space for the government to borrow for investment. But to placate markets, the Chancellor will also have to show some fiscal discipline too – this looks set to come in the form of increased taxes to cover day-to-day spending, likely in the £30bn per year range. In terms of how she will do this, some questions remain. Labour manifesto commitments rule out many of the obvious routes to raise revenues, leaving markets with a good idea of the options available. That said, the detail here will be key, and this has been lacking as yet. Even so, we are inclined to think that modest reforms combined with a boost to investment spending, should be a growth-positive mix. With this at odds with sentiment and headline ahead of today’s main event, we think risks are skewed towards a better-than-expected outcome for markets, which should ultimately prove positive for sterling.
CAD
USDCAD ticked higher on Tuesday, helped by soft data in the US and further commentary from BoC governor Macklem. This left BoC rate cut expectations to tick marginally higher on the day, weighing modestly on the loonie. Today, market focus is likely to be on Europe, which should leave USDCAD to track sideways for the time being. But Canadian GDP tomorrow, and NFPs on Friday, should see market attention return to North America later in the week, with the potential for a notable uptick in volatility ahead of the US presidential election.