US
USD is off its highs as the modest pullback in crude oil prices and New York Fed President John Williams’ call for patience tempered Fed rate hike bets. Williams said one more interest-rate hike “late this year” may be appropriate, adding that “with the policy action we took at our September meeting, there is no need for urgency, and we have time to gather more information.”
GBP was boosted by an upward revision to UK Q2 real GDP growth. The economy grew 0.5% q/q, up 0.1ppt from the previous estimate and 0.2ppt above the BOE’s forecast. The stronger expansion in Q2 was mainly because of increases in net trade, reflecting higher exports and lower imports.
IDR is outperforming across the board supported by Bank Indonesia’s ongoing commitment to maintain IDR stability.
HUF also leads the FX scorecard, buoyed by growing confidence in Hungary’s path to the euro. Central bank Deputy Governor Zoltan Kurali said “if the budget shows that Hungary can meet convergence criteria by 2030” then there would be no reason to wait to start the ERM-II procedure.
AUD is underperforming after the softer monthly rise in Australia’s CPI weighed on RBA cash rate futures. In August, headline CPI rose 0.4% (consensus: 0.5%) to be up 4.0% y/y (consensus: 4.1%, prior: 3.5%), while trimmed mean CPI increased 0.2% m/m (consensus: 0.3%) to remain at 3.6% y/y for a third straight month.
The US August PCE print takes the spotlight today (1:30pm London, 8:30am New York). Of note, the August PCE print will include annual revisions and changes to how several components, like portfolio management fees, are calculated. That could muddy the signal from the data.
Headline PCE is seen rising 0.3% m/m vs. 0.2% in July and be unchanged at 3.7% y/y. Core PCE is expected to rise 0.3% m/m vs. 0.2% in July and remain at 3.3% y/y for a third straight month. Real personal spending is expected at 0.5% m/m vs. 0.0% in July. Ahead of the PCE release, the September ADP private payrolls are seen at +72k vs. +38k in August (1:15pm London, 8:15am New York).
Bottom line: sticky US underlying inflation, a rebound in consumer spending, and resilient labor demand will reinforce the Fed’s hawkish bias. That should underpin the upswing in USD.
UK
UK financial markets barely reacted to Prime Minister Andy Burnham’s speech yesterday. His speech focused on his long-term policy agenda ahead of the next general election, due by 2029, instead of a blueprint for immediate policy action.
Attention now turns to the October 28 Autumn Budget, which looks set to bring tax rises and spending cuts as Chancellor John Healey seeks to build a solid fiscal “buffer against uncertainty.” Tighter fiscal policy would reduce the need for the BOE to deliver the 100bps of rate hikes priced over the next twelve months, and leaves GBP vulnerable to a dovish BOE repricing.
CHINA
USD/CNH is trading heavy around 6.7000, after reaching a multi-year low of 6.6912 last week. China’s September PMIs signal a modest recovery in economic activity, with fresh government stimulus set to support momentum. China unveiled mortgage subsidies for first-time home buyers and changes to bank lending policies to encourage banks to lend to targeted sectors.
In our view, USD/CNH downtrend is intact reflecting both China’s internal rebalancing story and CNH internationalization potential. A continued appreciation in China’s currency can help the country shift its growth model towards consumer spending by boosting disposable income through cheaper imports. Meanwhile, CNH’s small reserve footprint relative to China’s economic weight leaves scope for greater central bank demand.
EUROZONE
EUR/USD steadied after falling yesterday to 1.1312, its lowest level since May 2025. France’s 10-year bond yield premium over Germany widened to 120bps, the highest since 2012. France’s debt agency flagged yesterday that total financing requirement for 2027 will stand at a record €339.7bn, up €28bn from 2026, assuming a public deficit target of 5.0% of GDP.
France 2027 budget will be released tomorrow. A rollover of the 2026 budget is the most likely outcome given the limited appetite for compromise before the presidential election on April 18, 2027. That could push the deficit from around 5.1% of GDP in 2026 to roughly 6.0% in 2027, taking France further away from its European Commission commitment to bring it below 3% by 2029.
Regardless, France’s worsening fiscal credibility remains country-specific and not systemic as Eurozone periphery bond yields spreads to Germany are contained, limiting the drag on EUR.
