• Focus on 2023 Annual Budget this Friday.

Global Highlights

Dollar Index – After trading around 114 during mid-week, the dollar ended Friday weaker by 0.12% to 112.117, partly due to the direct intervention by the BOE after selloff of the long tenor gilts. The dollar is expected to trade higher this week, as focus will be on the US labour market data that will be published on Friday.

US equities & sovereign bonds – Wall Street was down as the Dow Jones dropped 1.71% to 28,726, S&P500 sank 1.51% to 3,586, and Nasdaq lost 1.51% to 10,576.

The UST10Y benchmark yield jumped by 4.30bps to settle at 3.829%, and the UST2Y up by 8.63bps to 4.273%, bringing the yields differential between UST10 and UST2 widened to -45.01bps.

Euro – The euro was down by 0.13% to 0.980, as market did not welcome the news that inflation increased by 10.0% in September. Expect inflation to remain high in the Euro, particularly after Gazprom has announced that they have cut off entirely energy supply to Italy.

British pound – The pound gained by 0.48% to 1.117, but still trading at lowest levels due to market’s pessimism on the UK’s economy due to higher energy prices, worsening cost of living, and high interest rates environment. We foresee the UK market to remain volatile and sensitive to the headlines news over the week. We expect Bank of England (BoE) to unlikely hike rates before its scheduled November 3 meeting despite a lot of tightening is being priced into swaps markets.

Japanese yen – The yen depreciated by 0.19% to 144.740, continuing its depreciating trend due to monetary policy divergence between the Bank of Japan and other global major central banks, including the Fed. The sharp depreciation of the yen is not forcing the BOJ to change its course at the moment, despite the high probability of pushing inflation much higher.

Chinese yuan – The yuan gained by 0.13% to 7.116, due to the weaker dollar and measures took but the government to support the yuan.

Korean won – The won gained by 0.49% to 1,432.12. South Korea’s economy continues to show weaknesses, as latest industrial production growth slow down from 1.5% in July to 1.0% in August, reflecting to the high inflation, and high interest rates environment.

Australian dollar – The Australian dollar weakened by 1.54% to 0.640. Expect the Aussie dollar to be volatile this week as the RBA is scheduled to meet on Tuesday, where consensus is expecting a 50bps rate hike to be made, pushing the interest rates to 2.85%.

Source: AmInvest Research - 3 Oct 2022