What moved
The week was the Australian dollar going down. All six of the biggest moves among the 28 pairs had the Aussie on the losing side, and AUD/CHF fell the most. Even against the New Zealand dollar, itself sixth of the eight, the Aussie lost -1.18%.
| Pair | Monday to Monday |
|---|---|
| AUD/CHF | -2.05% |
| AUD/USD | -1.87% |
| GBP/AUD | +1.68% |
| AUD/JPY | -1.60% |
| EUR/AUD | +1.59% |
| AUD/NZD | -1.18% |
Against the basket of the other seven, the Swiss franc finished first, ahead of the US dollar and the British pound. The Japanese yen and the euro sat close together in the middle. The three commodity currencies took the bottom three places, with the Australian dollar last by a distance behind the Canadian dollar and the New Zealand dollar.
| Currency | Against the basket |
|---|---|
| Swiss franc | +0.71% |
| US dollar | +0.52% |
| British pound | +0.30% |
| Japanese yen | +0.24% |
| Euro | +0.21% |
| New Zealand dollar | -0.18% |
| Canadian dollar | -0.42% |
| Australian dollar | -1.36% |
Risk sentiment: risk off all week, deepest on Friday
Our risk sentiment reading, the heaviest of the four pillars at 40, stood at -3 on Monday morning. It fell to -41 on Tuesday and -48 on Wednesday, recovered to -11 on Thursday morning and dropped to -68 on Friday. Our label called it mildly risk off on Monday and Thursday, risk off on Tuesday and Wednesday, and strongly risk off on Friday.
Thursday was the day that counted. The S&P 500 fell 4.4% in one session and the Nasdaq 5.5%, and the VIX closed at 28.2. We could not find a cause for the drop in a source we trust, so we leave it open. Stocks had bounced 1.8% on Wednesday and won back 0.8% on Friday, but the S&P 500 still ended the week 2.7% lower, with the VIX at 25.6.
The currencies followed the mood closely this time. The franc and the dollar, the two that gained most from the flight out of stocks, took the first two places. The Australian, Canadian and New Zealand dollars, the currencies that lean on growth and commodities, took the last three. The yen was the exception among the havens: it did little in the sell-off and finished fourth.
The central banks
Two banks met and both raised rates.
- The RBA raised its cash rate by 25 basis points to 4.85% on Tuesday, 04:30 Amsterdam time. The decision was by majority: six members voted for the hike and three to hold at 4.60%, after a unanimous vote in September. The bank's staff revised the inflation outlook materially higher. "Monetary policy is well placed to respond to developments, and the Board is focused on its mandate to deliver price stability and full employment," its statement said. The Australian dollar was already the weakest in the basket that morning.
- The Bank of England raised Bank Rate by 25 basis points to 4.00% on Thursday, as expected, by 8 votes to 1. Mann wanted a larger step of 50 basis points. The bank sees inflation rising to around 5% by mid-2027 and set out no fixed path for rates, according to its Monetary Policy Summary. The pound finished third.
The Fed, the ECB, the Bank of Japan, the RBNZ, the SNB and the Bank of Canada did not meet. Every rate and every next meeting is on the central banks page.
Geopolitics and the data
Oil set the tone on Monday. WTI fell about 7% on the day to around 96.5 dollars as talks with Iran over the Strait of Hormuz made progress, Euronews reported. It fell another 7.5% on Wednesday and ended the week near 90.5 dollars, 13.1% lower than a week earlier. That took support away from the Canadian dollar from the first day.
The US had the biggest figure of the week. The economy added 165,000 jobs in October against roughly 55,000 expected, unemployment was 4.1%, and August and September were revised up by 84,000 together, according to the Bureau of Labor Statistics. Average hourly earnings rose 0.4% on the month. After the report, markets put the chance of a Fed hike in December at about 77%. Earlier in the week, ISM manufacturing rose to 55.5 in October from 54.5, above the 54.6 expected (ISM). The midterm elections on Tuesday gave the Democrats the House and the Senate, according to early results reported by NBC News.
Canada's jobs report came out at the same time and went the other way. Employment fell by 4,700 against a rise of 13,600 expected, and unemployment rose 0.2 points to 6.7% (Statistics Canada). The New Zealand labour market was weak as well: unemployment rose to 5.7% in the September quarter from 5.6%, against 5.5% expected (Stats NZ).
In Europe, eurozone inflation rose to 4.0% in October from 3.8%, with energy at 20.8% and the core rate unchanged at 2.5% (Eurostat). The euro still finished fifth, close to the yen. Swiss inflation rose to 1.5% in October, above the roughly 1.3% expected (Federal Statistical Office), which gave the franc a reason to gain beyond the fall in stocks.
What the research said, and how it went
The one setup with our mark and what it came to is in the table at the top of this page: 1 of 1, +0.41%. The week before came to 3 of 6 and -0.10%. The setups in the list without our mark did much worse, at 4 of 14 and -1.88%, and the whole list came to 5 of 15 and -1.47%. The running record is on the track record.
The kiwi on Monday, and the euro against it on Thursday, were read right. Short NZD/USD carried our mark on Monday and gained +0.41% to Tuesday, as stocks slipped and the kiwi stayed weak after the RBNZ held in October. Long EUR/NZD on Thursday, without our mark, gained +1.12% to Friday, the day the sell-off in stocks pushed the kiwi down.
The Aussie was read right and timed wrong. The Australian dollar fell -1.36% over the week and AUD/USD -1.87%. But short AUD/USD lost -0.53% from Tuesday to Wednesday and -0.21% from Wednesday to Thursday, and short AUD/CHF lost -0.47% and -0.16% over the same two days. The first drop came before the London opening on Tuesday, straight after the RBA. On Wednesday stocks bounced 1.8% and the Aussie bounced with them. The big fall came on Thursday, a day the list did not carry the Aussie. Short NZD/USD on Friday lost -0.98% as well: the kiwi bounced against the dollar into Monday, even after the strong US jobs report, while stocks won back part of the drop.
The ranking had a mixed week. The first currency beat the last on 2 of 5 mornings, for +0.72% together. The US dollar, ranked first on Monday, finished second at +0.52%. The franc, ranked seventh, finished first at +0.71%, for the second week running after being ranked low. The Australian dollar, ranked second, finished last at -1.36%.
This week
- Monday: Bank of England Governor Bailey speaks in Zurich at 18:25 Amsterdam.
- Tuesday: US CPI for October at 14:30, and the Bank of Canada's summary of deliberations at 19:30.
- Wednesday: German final CPI at 08:00. US markets are closed for Veterans Day.
- Thursday: UK GDP for the third quarter at 08:00.
- Friday: eurozone GDP, second estimate, at 11:00, and US PPI at 14:30.
No central bank meets. US inflation on Tuesday is the first big US figure since the jobs report, and the UK growth figures on Thursday are the first since the Bank of England hike. Australia, New Zealand and Switzerland have no major release. Every date and time is on the calendar.