Macro/FX Watch: US exceptionalism, China budget boost, hot Australia CPI and ECB’s upcoming pause Macro/FX Watch: US exceptionalism, China budget boost, hot Australia CPI and ECB’s upcoming pause Macro/FX Watch: US exceptionalism, China budget boost, hot Australia CPI and ECB’s upcoming pause

Macro/FX Watch: US exceptionalism, China budget boost, hot Australia CPI and ECB’s upcoming pause

Forex 5 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  Divergence in US and Eurozone PMIs boosted the US exceptionalism story once again and brought back gains in the dollar. Q3 GDP data due this week can further accentuate this trend, while ECB’s dovish surprise could make EURUSD threaten to break below 1.0550. AUDUSD boosted by hot Q3 CPI while RBA’s tolerance to high inflation is seen limited, but China and global sentiment drags likely to continue.

Key points

  • US PMIs signalled a continuation of US exceptionalism story, offering a false sense of relief on the growth front
  • We remain cautious going into the end of the year given the consumer weakness signalled by credit card debt statistics and rising delinquency rates
  • Misguided sense of relief on geopolitics as well as Israel delays ground operation in Gaza
  • USD likely to be sideways until US data starts to weaken or geopolitical concerns de-escalate
  • EUR downside still prominent after PMIs and bank lending survey highlight recession concerns, but spikes to 1.0650 cannot be ruled out
  • AUD buoyed by hot CPI boosting the case for RBA November rate hike and China’s budget boost, but AUD cannot ignore China’s property sector concerns and growing global recession fears

USD: Misplaced growth and geopolitical relief

The USD was sold off on Monday but reversed all of its losses yesterday with the US exceptionalism story seemingly continuing for now. US preliminary PMIs yesterday for October surprised to the upside, with both manufacturing and services coming in the expansion territory. Manufacturing PMI was at 50.0 (prev. 49.8) against the expected 49.5 while services rose to 50.9 from 50.1, despite consensus for a decline to 49.9. Overall, the compose PMI was strong at 51.0 from 50.2 in August and consensus at 50.0. This has brought the expected 2024 terminal rate a notch higher to 4.6% from 4.5% earlier, as higher-for-longer gets more weight. Similar message could come from the advance Q3 GDP data due in the US tomorrow. Consensus expects growth of 4.5% QoQ annualized from 2.1% previously. However, despite the US economic strength sustaining, we remain cautious going into the end of the year given the consumer weakness signalled by credit card debt statistics and rising delinquency rates. Markets are likely to get a misplaced sense of relief from the strong US economic data, and therefore any strength of the US dollar could continue to remain short-lived.

However, on the other hand, market also has a misplaced sense of relief on the geopolitical front with Israel holding off on the ground invasion of Gaza. Oil has seen huge declines this week as the war premium gets erased amid reports that Israel may be reconsidering its ground invasion on humanitarian grounds. However, air strikes continue and risks of a regional escalation still remain. If geopolitical concerns were to widen, we could see a bid again in USD. Likewise carry trades could also keep USD supported, but from a fundamental and yield perspective, strength of the dollar is looking shaky.

Market Takeaway: US economic data could remain strong this week, providing a false sense of relief. USD gains coming from data surprises will likely remain shaky.


EUR: Dismal PMIs and bank lending survey makes ECB dovish surprise likely

While the US PMIs were strong yesterday, there was a broad underperformance in Eurozone PMIs both relative to expectation and relative to the US, breaking any myths of a potential stabilisation. Eurozone composite PMI slipped back to 46.5 from 47.2 with manufacturing staying weak at 43 while services disappointed, slipping back to 47.8 from 48.7 (vs. 48.6 expected). PMI indicators also showed price pressures cooling and job market loosening, suggesting ECB may have a high chance of surprising dovish this week. Bank lending survey also showed further pressure from tighter lending standards and weak borrowing demand. EURUSD slid back lower to the 1.06 handle from highs of 1.0694.

While the Eurozone growth outlook continues to deteriorate, a lot of the bad news is priced in the EUR. China stimulus plans also will likely be modestly supportive for EUR, but a significant dovish surprise from the ECB this week could threaten channel support at 1.0570. Reversal above 0.236 resistance at 1.0643 may be needed to bring uptrend in focus.

Market Takeaway: Macro backdrop remains downbeat but positioning has been turning long. All eyes on ECB where a dovish surprise can bring EURUSD lower to 1.0550 levels, but spikes to 1.0650 area remain likely as USD loses traction.

Source: Bloomberg

AUD: Buoyed by hot CPI and China budget boost

We had highlighted last week the case for a divergence in Australia and New Zealand’s inflation for Q3. Australia’s Q3 CPI came in higher-than-expected today, with the headline rising 5.4% YoY vs. 5.3% expected and trimmed mean rising 5.2% YoY vs. 5.0% expected. This comes after recent comments from RBA Governor Michelle Bullock who has been stressing low tolerance towards slow return of inflation to target, which had the markets extremely sensitive to the inflation reading. AUDUSD rallied to test the 0.64 handle this morning before easing slightly. We still believe that the bar for the RBA to hike rates is very high, given the labor market has been cooling. Gains in AUDNZD also extended to 1.09+ levels, but we remain sceptical that these could stick.

AUD also got a boost from China’s one-trillion yuan budget boost announcement which lifted industrial commodities. However, property sector overhang still continues, and any lift to AUD may remain temporary.

Market Takeaway: AUDUSD and AUDNZD extended gains on China stimulus and hot CPI making the November rate hike a possibility, however it will remain hard for AUD to ignore China’s property sector overhang and global recession concerns.


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.