North American FX Open - Dollar remains at precarious levels

The Dollar remained under pressure overnight, with the DXY making another downward foray close to last Friday's fourteen month lows. The basket remains a focus, as the key psychological 100 level approaches, while the 2023 low at 99.578 will be the next downside target.

Eur/Usd popped higher in European trade, after the German state CPIs and the Italian inflation numbers didn't substantially miss to the downside like the French and Spanish numbers did on Friday. The pair did manage to scale the 1.1200 level once again, but as we saw on Wednesday and Friday of last week, a foothold could not be established. Noted ECB watcher, Frederik Ducrozet at Pictet Wealth Management, stated that there was no clear drop in German underlying inflation metrics, but there was no upside surprise either. Ducrozet added that the disinflation trend still intact, which means that Euro area core HICP inflation is still likely to ease in tomorrow's flash release.

Chinese stimulus moves continue to grab the headlines. The SHCOMP Shanghai share index rose by over 8%, after three of the country’s largest cities eased rules for homebuyers, following through on the central government’s latest efforts to prop up the embattled real estate sector.

Over the weekend, the PBOC stated Chinese homeowners will be able to renegotiate terms with their current lenders effective November 1, helping to lower borrowing costs on over Usd 5tln of mortgages for millions of families.

Overnight, there were a batch of public and private Chinese PMIs released. The official composite improved to 50.4 vs 50.1 last, while the Caixin slowed to 50.3 vs 51.2 in September. However, the official manufacturing PMI gain and firmer than expected 49.8 vs 49.1 the month previous likely attracted most market attention. The improvement was much needed, but also marked a fifth straight month of contraction and showed just why China stimulus is so necessary currently.

Meanwhile, Japan IP badly missed expectations in early August, falling by 3.3% m/m vs a -0.5% consensus and 3.1% the month previous. The data is a concern for Q3 and of course the new PM, with Bbg reporting Ishiba set to name party veterans to senior posts in his first cabinet as he broadly pursues continuity in economic, monetary and foreign policy, ahead of lower house elections on October 27th.

In the UK, the final Q2 GDP print was revised down to 0.5% from 0.6%, but the GDP for 2023 was revised up to 0.3% from 0.1%.

The Nationwide House price reading for September rose by 0.7%, its best month since February.

The BBC reported that Iran’s supreme leader said that the death of Hezbollah leader Hassan Nasrallah 'will not go unavenged', a day after he was killed in an Israeli air strike in Lebanon. Also, Israeli jets bombed a seaport and several power stations in Yemen, targeting oil infrastructure, after attacks by Iran-backed Houthi rebels and US Secretary of Defence Lloyd Austin warned Tehran against targeting Americans in the Middle East, while Joe Biden said an all-out war must be avoided.

US data today includes the Chicago PMI, while the Fed's Powell speaks at the NABE. The Fed's Bowman is also scheduled to provide opinion, while the ECB's Lagarde and the BoE's Greene are also on the speaking calendar.

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