US
The modest pullback in energy prices eased the global bond sell-off and took some steam out of the USD rally. Nonetheless, US growth outperformance and strong foreign appetite for US securities keep USD risks skewed to the upside.
Yesterday, Fed Governor Christopher Waller made the case for keeping the Summary of Economic Projection (SEP) ahead of the task force report expected by year-end. Waller noted the SEP give markets a sense of direction without locking the Fed into a preset path.
Waller added he favors “additional hikes” if the economic data continue to come in as expected, but not necessarily “at consecutive meetings.” That leaves room for an October pause. Next week’s US September CPI report will help settle the October 28 FOMC hike or hold debate. Fed funds futures price in 20% probability of a back-to-back hike.
The October University of Michigan consumer survey is on deck (4:00pm London, 11:00am New York). The survey should continue to show that longer term inflation expectations remain anchored.
CHINA
USD/CNH dropped back under 6.7000, just shy of its multi-year low of 6.6912 reached on September 21. The PBOC published an unusual explicit defense of China’s currency policy, pushing back against claims the yuan is undervalued. The IMF’s 2026 assessment puts the CNH real effective exchange rate gap in the range of −17.3 to −25.3% with a midpoint of −21.3%. Similarly, the CNH real effective exchange rate remains roughly -11% below its estimated trend.
The PBOC challenges the reliability of IMF valuation models as a tool for estimating equilibrium exchange rates. The PBOC argues that the IMF works backward from China’s current account surplus to conclude that the yuan is too cheap and notes the models give conflicting results.
Regardless, 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.
NORWAY
NOK is weaker against most peers on a modest pullback in crude oil prices. Norway’s mixed September CPI keeps further Norges Bank rate hikes in play, supporting NOK. Headline CPI rose less than expected to 3.4% y/y vs. 3.3% in August, below consensus of 3.6% and the Norges Bank’s 3.5% projection. Underlying CPI remained at 3.0% y/y for a second straight month, below consensus of 3.1% but above the Norges Bank’s 2.9% projection.
At its last September meeting, the Norges Bank increased the policy rate 25bps to 4.50% and signaled preparedness to “raise the policy rate further if warranted by the inflation outlook.” Sticky underlying inflation above its forecasts keeps that option on the table. The swaps curve still price-in roughly 50% odds of another 25bps hike to 4.75% by year-end.
CANADA
USD/CAD is consolidating just above 1.4200, after reaching fresh cyclical highs near 1.4300 earlier this week. Canada’s September labor force survey is today’s highlight (1:30pm London, 8:30am New York). The economy is expected to add +10.0k jobs after losing -41.7k jobs in August. The unemployment rate is seen rising 0.1ppt to 6.5% on an unchanged participation rate of 65.0%, pointing to weak labor demand.
Nearly 100bps of BOC rate hikes priced over the next twelve months looks too aggressive and leaves CAD vulnerable to a dovish repricing. Canada core inflation is near the banks’ 2% target and indicators point to continued excess supply in the economy.
