Forexlive European FX news wrap: Ukraine’s use of ATACMS missiles triggers some risk-off

• ECB’s Muller: I don’t see a reason to move in bigger steps now
• BoE’s Lombardelli: I see risks to inflation on both sides
• BoE’s Mann: Forward-looking indicators raising the risk of inflation persistence
• BoE’s Taylor: Gradual cuts implies 100 bps of easing over the next year
• BoE’s Bailey: We need to watch services inflation very carefully
• ECB’s Panetta: Still a long way from the neutral rate
• Eurozone October final CPI +2.0% vs +2.0% y/y prelim
• Stocks accelerate losses as risk aversion grips markets
• Eurozone September current account balance €37.0 billion vs €31.5 billion prior
• Bond yields push lower in European morning trade
• Goldman Sachs cuts forecast for European stock indices over the next 12 months
• European indices mostly little changed to start the day
• What are the main events for today?
• Eurostoxx futures +0.2% in early European trading
• Switzerland October trade balance CHF 8.06 billion vs CHF 4.95 billion
• China widely expected to keep benchmark lending rates unchanged this week
• EUR/USD downside stalls as dollar rally pauses for breath
• Goldman Sachs sees S&P 500 hitting 6,500 by the end of next year
• A light one on the data docket in Europe once again
• USD/JPY remains very much connected to the yields story for now

We had no notable data release in the European session today. Overall, it’s been a quiet session but we had some short-term risk aversion at some point triggered by the news that Ukraine striked Russia with the long range ATACMS missiles.

Elsewhere, we had some BoE’s members speaking before the UK Treasury Committee but we haven’t got anything new in terms of forward guidance. The central bank is planning to move rates down gradually but it’s willing to move faster in case economic conditions warrant such a move.

In the FX market, we have the US Dollar continuing to consolidate around the recent highs as the market looks fine with the current pricing of three rate cuts by the end of 2025 and might need stronger reasons to price out some more.

Equity markets are down on the day potentially due to the risk aversion moves triggered by the Ukraine news, while bonds and gold are up.

In the American session, the focus will be on the Canadian CPI report. The Canadian CPI
Y/Y is expected at 1.9% vs. 1.6% prior, while the M/M figure is seen at 0.3%
vs. -0.4% prior. The focus will be on the underlying inflation measures with
the Trimmed Mean CPI Y/Y expected at 2.4% vs. 2.4% prior, while the Median CPI
Y/Y is seen at 2.4% vs. 2.3% prior.

The BoC is now focused
on growth as the inflation rate has been inside the target band for several months while
economic activity slowed down. The market is pricing a 35% chance of another 50
bps cut in December, so lower than expected inflation readings will likely
raise those probabilities.

This article was written by Giuseppe Dellamotta at www.forexlive.com.