What moved
The week belonged to the Canadian dollar. The three biggest moves among the 28 pairs were the Canadian dollar rising against the euro, the Australian dollar and the US dollar. The euro and the Australian dollar also lost against the New Zealand dollar and the franc.
| Pair | Monday to Monday |
|---|---|
| EUR/CAD | -1.24% |
| AUD/CAD | -1.21% |
| USD/CAD | -1.11% |
| EUR/NZD | -1.00% |
| AUD/NZD | -0.97% |
| EUR/CHF | -0.96% |
Against the basket of the other seven, the Canadian dollar led and the New Zealand dollar and the Swiss franc followed. The bottom three were the US dollar, the Australian dollar and the euro. The dollar ended sixth in a week of strong American data.
| Currency | Against the basket |
|---|---|
| Canadian dollar | +0.71% |
| New Zealand dollar | +0.47% |
| Swiss franc | +0.43% |
| British pound | +0.06% |
| Japanese yen | -0.21% |
| US dollar | -0.40% |
| Australian dollar | -0.51% |
| Euro | -0.54% |
Risk sentiment: from on to off
Our risk sentiment reading, the heaviest of the four pillars at 40, started the week risk on at +29 on Monday. It slipped to +21 on Tuesday and +9 on Wednesday morning. That evening US stocks fell after the inflation figure, with the S&P 500 down 1.4% on the day and the Nasdaq 100 down 2.2%.
Thursday and Friday morning were calm, with the VIX around 16. Then on Friday afternoon tech stocks slid on worries about AI debt. The Nasdaq fell more than 2% and the S&P 500 more than 1%, the VIX closed around 20, and by Friday evening our reading had turned to risk off.
The basket shows that turn only in part. The franc, which a nervous market buys, finished third. The Australian dollar, the currency that most needs confidence, finished seventh. The yen got no lasting haven bid and ended fifth, and oil kept the Canadian dollar on top whatever the mood did.
The central banks
No central bank changed its rate this week. What came out were minutes and words.
- The RBA published the minutes of its September meeting on Tuesday. The board was unanimous on the hike to 4.60% on 29 September, called inflation too high and kept further steps open if required.
- Finance Minister Katayama of Japan warned on Thursday 15 October that Japan may act again on the yen. The yen still finished the week at -0.21% against the basket.
- Lagarde of the ECB said during the week that the fall in bond prices weighs on growth more than the bank had projected. The euro ended last of the eight.
- The Fed went into its quiet period before the decision of 28 October, after a week of inflation and retail figures above expectations.
Every rate and every next meeting is on the central banks page. Five of the eight banks decide between 28 and 30 October: the Fed, the Bank of Canada, the RBNZ, the ECB and the Bank of Japan.
Geopolitics and the data
US CPI on Wednesday came in at 3.7% for September against 3.6% expected, with core at 2.6% against 2.5% (BLS). On Thursday US retail sales rose 0.8% against 0.3% expected, with August revised up to 1.3%. Industrial production followed on Friday with a rise of 0.7%. None of it held the dollar up for long, and it ended the week at -0.40%.
The figure that did the most damage came from Australia. The Australia jobs report showed employment down 39,300 in September against a gain of about 20,000 expected. Unemployment rose to 4.7%, against 4.6% expected, and participation fell to 66.8% (ABS).
In Britain, UK GDP grew 0.1% in August against a fall of 0.1% expected (ONS). In Europe, final German inflation was confirmed at 3.3% on Tuesday (Destatis) and eurozone inflation at 3.8% on Friday (Eurostat), both in line with the first estimates.
Oil was the line from geopolitics. A Houthi missile hit Riyadh airport on Saturday 10 October, and a second strike followed on Sunday, without a visible move in oil on Monday morning. Tension around the Strait of Hormuz did the rest: WTI went from around 91 dollars at the previous Friday's close to near 99 dollars at this Friday's close. That is the main reason the Canadian dollar led a week without a single Canadian release.
What the research said, and how it went
The three setups and what they came to are in the table at the top of this page: five calls, 0 of 5 the expected way, -3.05% together. The week before, the setups with our mark came to 8 of 11 and +0.32%. The setups in the list without our mark did better this time, at 3 of 4 and +0.45%. On Thursday and Friday the list held no setups at all. The running record is on the track record.
The Australian dollar was read wrong at the worst moment. Long AUD/CHF and long AUD/JPY both carried our mark on Wednesday morning. That evening US stocks fell on the inflation figure, and a few hours later the Australian jobs report came in far below expectations. From Wednesday to Thursday AUD/CHF lost -1.39% and AUD/JPY lost -1.34%. Long AUD/JPY had already lost -0.31% from Monday to Tuesday, and long AUD/CHF was flat at 0.00% that day.
What went right was outside the mark. Long AUD/CHF without our mark gained +0.57% from Tuesday to Wednesday, before the jobs report, and long AUD/NZD and long NZD/CHF added +0.24% and +0.14%. Long USD/CHF, the only marked call on Tuesday, went nowhere at -0.01%. The franc held up better than the dollar despite strong American data.
The ranking itself was mixed. The first currency beat the last on 2 of 3 mornings. The Australian dollar went into the week ranked first and finished seventh at -0.51%. The Canadian dollar, ranked fifth on Monday, finished first at +0.71%, and the franc, ranked last, finished third at +0.43%.
This week
- Monday: Canada CPI at 14:30 Amsterdam.
- Tuesday: the UK labour market report at 08:00.
- Wednesday: UK CPI at 08:00 and New Zealand CPI at 23:45 Amsterdam.
- Friday: Japan CPI at 01:30 Amsterdam.
An inflation week, and the last full week before five central banks decide. Canadian inflation on Monday is the first release for the currency that led the basket on oil alone. British jobs and inflation on Tuesday and Wednesday come ahead of the Bank of England on 5 November, and Japanese inflation on Friday comes a week before the Bank of Japan. Every date and time is on the calendar.