German Manufacturing PMI Helping Euro, But For How Long

The better-than-expected German flash PMI for October is pushing the euro higher. was a bit worse, but that isn’t really a surprise, with the renewed spread of covid weighing on the domestic outlook. The manufacturing number indicates an improving global situation and is hence risk-positive.

But I think the upside for the will be limited outside of the short-covering bounce post the PMI data. It looks like the strong EU  Bond demand seen earlier in the week has dried up, so the isolated rally in the pair might not be sustainable amid a rise in covid cases and mobility restrictions across Europe. This should eventually be reflected in weaker data, and I see a limited upside for the euro. Looking to sell EUR/USD at 1.1850/70, with a stop above 1.1910.

Gold 

struggled a bit and gave back all the gains after some of the positive-sounding US stimulus headlines earlier in the week. There seems to be a bit of risk reduction taking place ahead of the US election on Nov. 3. But with the EUR/USD pushing higher, it won’t take much to light a fire under gold in this risky, risky environment, but I think the upside will be limited as the EUR/USD should quickly run out of steam.

Bund Selloff Stalled?

Does the market reaction suggest the momentum of the Bund sell-off may have stalled for the time being? There has been a minimal reaction in Bunds to this morning’s PMI data. The , on the other hand, is flying now and is up 1.25% from the earlier lows.

TRY Weaker Post-CBT

After the surprising decision from the Central Bank of Turkey, yesterday to leave its policy rate on hold, opened slightly weaker today. Although the CBT aims to tighten via using the LLW facility at 14.75%, offshore funding is very loose, trading at 8.5%, opening up the onshore-offshore gap even more.

Russia Open To Delaying Oil Production Increase

Russian President Putin said yesterday that rising prices mean there’s no need to alter the OPEC+ deal. Still, Russia would be open to delaying the OPEC+ production increase expected from January if conditions change.

Russian producers have historically been the least eager to participate in OPEC+ cuts, bad on compliance, and quickest to ramp production when permitted. This early signal from Putin that Russia and Saudi Arabia are on the same page will support oil.