Middle East news was fairly quiet during the session here. Speculation is rife
that the ground moves on Gaza will commence this weekend, perhaps the
eerie quiet is support for this. US Treasuries rose a little during
the session (i.e. yields dipped). If there are moves on the ground
into Gaza a market ‘flight to safety/liquidity’ response should
play out, I expect further gains for USTs as we get closer to the
weekend.
The
FX space was fairly quiet. AUD and NZD dipped but have retraced to be
barely changed on the session as I update. GPB and EUR followed a
similar pattern. Current favourite CHF (another perceived safe haven)
is also little changed.
USD/JPY
was interesting. After Japanese inflation data (more on this to come)
USD/JPY ticked higher towards 150, again. Japanese Finance Minister
Suzuki dropped a few verbal intervention remarks into play. These
were nothing out of the ordinary. Were they effective? USD/JPY has
dribbled back under 149.85 so, on the face of it, perhaps yes.
With
little news crossing the attention turned to data, with Japan CPI
data for September published. Japan’s
core inflation, which excludes volatile fresh food costs, rose 2.8%
in September from a year earlier, slowing
below 3%
for the first time in over a year. Obviously, that is well above the Bank of Japan target at 2%, and has been for
18 months now.
The
core-core
index, which strips away fresh food and fuel costs and
is the closest to the US measure of core inflation
rose 4.2% in September from a year earlier, from a 4.3% gain in August.
On
the central bank front, we had some blunt comments from Federal
Reserve Bank of Dallas President Lorie Logan, including her view that
she is not yet convinced the US is moving to 2% inflation.
A
little later, from the People’s Bank of China, we had the monthly
setting of Loan Prime Rates (LPRs). Both the one- and five-year
remained unchanged at 3.45% and 4.2% respectively. The
PBOC set the USD/ CNY reference rate for today on the 7.17 big
figure, again. Of note was that the net 733bn yuan injection on the
day in Open Market Operations was the biggest ever on record. Combine
that with the chunky 789bn yuan Medium-term Lending Facility (MLF) earlier in the week (500bn matured),
which was the largest since December 2020. Some easing via these
tools, albeit limited, this week from the PBOC.
In
news for oil markets, the US Department of Energy is seeking to buy 6
million barrels of crude oil for delivery to the Strategic Petroleum
Reserve in December and January. Please put down your cup of coffee
or tea now. You ready? The department hopes to sign purchase
contracts for the oil at $79 a barrel or less. Good luck with that.
Yields dipped back a little: