EUR/USD exhibits a weak performance in Thursday’s European session after diving below the key support of 1.0950 on Wednesday. The major currency pair remains under pressure as the US Dollar (USD) clings to gains ahead of the United States (US) Consumer Price Index (CPI) data for September, which will be published at 12:30 GMT.

The US Dollar Index (DXY), which tracks the Greenbacks value against six major currencies, trades close to a fresh seven-week high near 103.00.

Economists expect the annual core CPI – which excludes volatile food and energy prices – to have grown steadily by 3.2%. Annual headline CPI is expected to have decelerated to 2.3% from 2.5% in August. The month-on-month headline and core CPI are expected to have grown at a slower pace of 0.1% and 0.2%, respectively.

The impact of the inflation data on market expectations for the Federal Reserve (Fed) interest rate outlook is expected to be moderate as recent commentaries from Fed officials have indicated that they are confident about price pressures remaining on track to return sustainably to the bank’s target of 2%. Fed policymakers are highly focused on reviving labor demand due to which they unanimously voted for a larger-than-usual rate cut size of 50 basis points (bps) in the September policy meeting.

However, the scenario of blowout inflation figures could renew risks of inflation remaining persistent and negatively influence market expectations of two more interest rates in the remaining year.

Daily digest market movers: EUR/USD weakens as ECB rate cut bets swell

EUR/USD remains vulnerable near a fresh eight-week low of 1.0940 due to multiple headwinds. Apart from the firm US Dollar, the Euro’s (EUR) underperformance against its major peers due to escalating European Central Bank (ECB) dovish bets has also kept the shared currency pair on the backfoot.

A majority of ECB officials have argued in favor of reducing interest rates further as risks of inflation remaining persistent in the Eurozone have significantly eased after the September flash annual Harmonized Index of Consumer Prices (HICP) report decelerated to 1.8%, the lowest since April 2021. Also, growing risks to economic growth have allowed traders to price in a 25-bps interest rate cut in each of the remaining two meetings this year.

German economic ministry said on Wednesday that they are expecting the economy to end the year with a 0.2% decline in the overall output. Earlier, the economic ministry projected a 0.3% growth but was forced to revise forecasts due to structural problems and geopolitical issues. Being the largest nation in the Eurozone, the impact of a de-growth in the German economy would be high on the Euro.

On the economic front, annual German Retail Sales, a key measure of consumer spending that prompts inflationary pressures, expanded at a robust pace of 2.1% in August after contracting by 1.6% in July. On month-on-month, the consumer spending measure rose at a faster pace of 1.6% from 1.5% in July.

Technical Analysis: EUR/USD trades close to fresh eight-week low below 1.0940

EUR/USD extends its downside to near 1.0935 after failing to hold the key support of 1.0950. The major currency pair weakened after it delivered a breakdown of the Double Top chart pattern formation on a daily timeframe. The above-mentioned chart pattern was triggered after the shared currency pair broke below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) settles inside the bearish range of 20.00-40.00, suggesting more weakness ahead.

Looking down, the pair is expected to find support near the 200-day EMA around 1.0900. On the upside, the September 11 low of 1.1000 and the 20-day EMA at 1.1090 will be major resistance zones.

Source: FXSTREET

Thailand’s Securities and Exchange Commission is proposing to allow mutual and private funds to invest in crypto products, addressing growing interest from institutional investors.

An Oct. 9 proposal from the finance regulator stated that funds would be allowed to invest more in crypto exchange-traded funds (ETFs) traded and listed on United States stock exchanges.

The proposal would allow securities companies and asset management firms to offer crypto-related products to large investors.

“Investment tokens” will be included with the same investment ratios as transferable securities such as stocks and bonds “because they have similar characteristics and risks,” said SEC deputy secretary-general Anek Yooyuen told the Bangkok Post.

“Relevant criteria will be revised to support the establishment and management of funds investing in digital assets,” he added. 

However, there will be different rules proposed for various types of digital assets with high-risk assets like Bitcoin being treated differently from stablecoins.

There would also be restrictions with retail mutual funds limited to a 15% allocation in crypto investments, while institutional and high-net-worth investors would have no cap on exposure.

The SEC will also revise the criteria for managing funds investing in crypto assets, including asset custody, value calculation, information disclosure, and advertising.

It also plans to authorize initial coin offering (ICO) portals which will be allowed to use outsourced companies for token fundraising or designing investment projects.

However, the regulator plans to hike the fines for “naked short-selling,” firms sending inappropriate trading orders, and market manipulation. Earlier this year, the SEC blocked unlicensed crypto exchanges from operating in the country. 

The SEC is also preparing a Digital Asset Regulatory Sandbox, which would involve ten private firms conducting trial projects for exchanging crypto assets for local currency. 

This could open the doors for crypto payments in the country, a practice currently outlawed by Thailand’s central bank. The SEC needs to discuss and seek approval from the Bank of Thailand regarding using crypto as a means of payment.

Retail crypto trading in Thailand remains popular, with its largest crypto exchange, Bitkub, seeing almost $30 million in daily volume, according to CoinGecko. 

Source: COINTELEGRAPH

Source: AP

Shares of Samsung Electronics sank to a 52-week low of 58,900 won ($44.25) on Thursday, hamstrung by the reverberating shock of the firm's weaker-than-expected third-quarter earnings, market watchers said.

Further clouding the outlook for one of the country's most popular stocks is the continued underweight position recommendations by brokerages.

Observers say the grim development prompts retail investors to abandon the Korean equity market, defined by the decades-long undervaluation of its stocks. This is often referred to as the "Korea discount."

Many opt for the U.S. market, where global IT leaders generate robust earnings, as evidenced by the steady rise in Korean retail investors' holdings of foreign currency securities over the past few years.

According to the Korea Exchange, the Samsung chipmaker's share price traded below the psychologically significant 60,000 won barrier, at around 9:30 a.m.

It was 1.33 percent down from the previous session and a continued drop from the previous high of 88,800 won valued on July 11.

The figure is a further decline from 60,300 won, Tuesday, when the firm announced the earnings for the July-September period. Sales came to 79 trillion won and operating profit at 9.1 trillion won, undershooting the market consensus of 80.8 trillion won and 10.3 trillion won, respectively.

Brokerage insiders say the semiconductor affiliate of Samsung Group will not see a meaningful rebound in the months to come, bogged down by an increase in both inventory and marketing costs in the fourth quarter.

The brokerage affiliates of Hyundai Motor, NH NongHyup and KB lowered their target price to between 90,000 won and 80,000 won. It was down from the previous price of between 104,000 won and 95,000 won.

A Hyundai Motor Securities report said Samsung's earnings were significantly poor even when accounting for one-time costs.

"The underperformance is pronounced, especially compared to its global competitors including Micron. The underwhelming performance is likely to continue through the fourth quarter, a seasonally challenging period for businesses," it said.

Meanwhile, Korea Securities Depository data showed that the holdings of U.S. foreign securities by retail investors in the country stood at $137.9 billion in the third quarter, up 8.3 percent from the previous quarter.

The amount settled over the same period came to $174.6 billion, up 37.5 percent.

Of them, foreign stocks accounted for over $102 billion as of end-September, up 7.8 percent from $94.6 billion from the previous quarter.

The holdings of foreign bonds over the same period rose to $35.9 billion, up 9.8 percent.

Nearly three-fourths of the total securities, or 74.4 percent, was invested in the United States, followed by Europe, Japan, Hong Kong and China.

Of the stocks, about 90 percent was invested in the U.S. at $91.8 billion, up 7 percent from the previous quarter.

The Top 10 most popular U.S. stocks Koreans invested in included Tesla, Nvidia, Apple and Microsoft.

Source: Koreatimes

In focus today

In the US we get the September CPI figures, which is the most important data release this week. We forecast headline inflation slowing down to 0.1% m/m SA and 2.4% y/y (from 0.2% and 2.6%) mostly driven by lower energy prices, and core inflation to 0.2% m/m SA and 3.2% y/y (from +0.3% and 3.3%). Signs of stickier price pressures especially in the services sector would add to expectations that the Fed opts for only smaller 25bp rate cuts at the coming meetings.

This morning at 10.00 CET, Danske Research hosts a US election webinar, covering fiscal and trade policy outlooks and implications for financial markets.

In Norway, we receive September CPI. We believe that the disinflationary tendency continued, but still expect core inflation to rise to 3.4% y/y, because of unusually low inflation in September last year. If we are right, this will be 0.1 percentage points higher than Norges Bank assumed in the MPR in September and in isolation confirm that there will be no rate cut this year, like we continue to expect.

We expect Swedish August GDP, production and consumption indicators (08.00 CET) all to show some improvement judging from previously released data such as employment, hours worked and retail sales. At 08.30 CET, Riksbank head Thedeén will be discussing the economic policy frameworks together with the head of the Swedish Fiscal Policy Council, Lars Heikensten (previously also head of the Riksbank).

In Denmark September CPI is due for release. Energy prices will drag inflation lower, and we expect a decline to 1.2% from 1.4% in August. The underlying price pressure has remained muted in Denmark despite solid wage growth.

Economic and market news

What happened yesterday

In the US, FOMC minutes suggest that the September rate decision was indeed a close call. The minutes describe that FOMC participants had somewhat differing views on how the easing cycle should be started. ‘Some’ participants would have preferred a 25bp cut and ‘a few others’ could have supported such decision. Ultimately, only Bowman dissented from the 50bp cut in the vote. Some emphasized that communicating the outlook for more cuts was more important than the size of the initial cut. So indeed, it was a close call between a 25bp and 50bp moves, as market pricing implied ahead of the meeting. Going forward, we stick to our call for a 25bp rate cut at the next meeting.

In the euro area several ECB members spoke about monetary policy. Villeroy said that a cut is very likely, and that it will not be the last one in this rhythm, but the pace is still dependent on how inflation evolves. In his support to cuts at the two remaining meetings this year, Stournaras argued that monetary policy will still be restrictive after cutting in both October and December. This adds to other members who have spoken for rate cuts over the last couple of weeks, even the traditional hawks Nagel and Kazaks. However, the hawkish tones still exist, for example Wunsch who is undecided as he still sees domestic inflation pressures as too high, and fears that geopolitical tensions could push energy prices higher.

China’s Finance Ministry will hold a briefing on Saturday on strengthening fiscal policy. Fiscal measures are typically announced by the Finance Ministry, which is why we did not get any details from the National Development and Reform Commission on Tuesday. The briefing on Saturday is thus the place to look for China’s fiscal stimulus plans. We do expect a clear fiscal stimulus plan, but markets will likely be nervous until we see the plans as there is some risk that they underwhelm expectations that have become very high. Still, calm has been restored in Chinese stock markets for now with offshore shares up 4% this morning.

In the Middle East, US president Biden and Israeli prime minister Netanyahu discussed Israel’s planned response to Iran’s missile attack last week. They also spoke about the Israeli offensive in Lebanon, where President Biden apparently urged Israel to find a diplomatic solution to avoid civilian casualties.

Equities: Global equities were higher yesterday, except for China and Latin America. The uplift in equities was relatively broad-based, although the defensive sectors lagged, particularly utilities which underperformed yet again. Utilities have been one of the best-performing sectors over the summer as yields have been coming lower and equity markets have been choppy. With the latest reassuring job data from the US and a lift in yields it is not so surprising to see the utility sector underperforming. In the US yesterday, the Dow closed up by +0.9%, the S&P 500 by +0.5%, Nasdaq by +0.4%, and the Russell 2000 by +0.4%. The positive sentiment continues in Asia this morning, including sizable lifts in both Chinese A-shares and H-shares. Futures in Europe and the US are also higher this morning.

FI: Global yields continued rising through yesterday’s session, as the market-implied number of rate cuts in 2024-25 continues to fade. The repricing of 10Y US Treasury yields over the past week (+30bp) seems hard to justify based on a single strong jobs report, and the move looks much more like an unwinding of excessive positioning towards a ‘very dovish Fed’ narrative. The Bund curve rose gradually 3bp across tenors yesterday, while the Bund-ASW spread saw marginal widening (now 27bp). Implied vol remains elevated with the MOVE index trading at the highest levels since April. As the US election approaches, implied rates volatility will likely remain elevated.

FX: EUR/USD has firmly consolidated below 1.10 during what has been a relatively uneventful week so far with focus turning to the release of September CPI print this afternoon. NOK continues to trade heavy amid not least oil coming lower and the sell-off in NOK FI losing steam. This morning, we could see some support to NOK though as we expect the monthly CPI release to reveal a print slightly above both markets’ and Norges Bank’s projections. Akin to EUR/NOK, EUR/SEK edged slightly higher during yesterday’s session but remains below the 11.40 mark.

A team of experts advising Indonesia's president-elect Prabowo Subianto are reviewing a scheme to impose levies on sugar imports to help finance the country's bioethanol programme, a member of the team said on Thursday.

Wider adoption of biofuel, both palm oil-based biodiesel and in ethanol fuel, is part of the energy transition agenda by Prabowo, who will take office on Oct 20.

Indonesia, however, does not have enough production of sugarcane, the main bioethanol feedstock, for its domestic demand and still relies on imported sugar.

Meanwhile, production cost of bioethanol in Indonesia is currently higher than production cost of gasoline per litre, making it unattractive for producers.

To help finance the price gap, experts advising Prabowo are reviewing the feasibility of imposing levies on imports of sugar, said Ali Mundakir, a member team advising Prabowo.

"So it would be the opposite of the levies on palm oil, which are imposed on exports," Ali told participants of a webinar held by think tank Institute for Essential Services Reform.

Indonesia collects levies on exports of palm oil to finance various programmes for the sector, including to subsidise the country's biodiesel programme.

"This is still being reviewed, while we seek for other feedstocks for ethanol production," Ali added.

It was unclear whether the team has discussed the proposal directly with Prabowo.

Indonesia plans to eventually mandate bioethanol content for gasoline at 15%.

The current government aims to expand the country's sugar plantation area to 700,000 hectares (1.73 million acres) from 180,000 hectares in 2022 and targets be self-sufficient in sugar production by 2028.

Source: Theedgemarkets