Headline: European FX Risk-On Rally as Traders Anticipate U.S. Shutdown Resolution
Introduction: Risk appetite returned to European currency markets as investors looked past political gridlock and positioned for an imminent end to the U.S. government shutdown. Equities, commodities, and high-beta FX gained, while policy signals from major central banks helped shape rate expectations.
Markets opened the week on the front foot, with S&P 500 futures up 0.9% and European indices firmly higher. Hopes that Washington will finalize a deal to reopen government services buoyed sentiment, easing liquidity concerns and raising the prospect of delayed economic data returning to the calendar. U.S. 10-year Treasury yields ticked up to 4.131% as investors recalibrated risk, while the dollar traded mixed against majors.
Monetary policy commentary added texture to the move. Fed’s Mary Daly emphasized openness to further rate cuts and noted signs of a negative demand shock, while the ECB’s Luis de Guindos reiterated confidence that current interest rates remain appropriate. In Japan, guidance from Prime Minister Sanae Takaichi’s camp urged the BOJ to hold off on a December hike, keeping the yen on the back foot. The Australian dollar led G10 gains, with AUD/USD around 0.6530, while USD/JPY held just above 154.00. Weaker sentiment data in Europe (Eurozone Sentix at -7.4 versus -4.0 expected) and a decline in SNB sight deposits to CHF 460.0 billion underlined divergent regional dynamics.
Commodities and digital assets rode the risk-on tide. Gold advanced roughly 2.5% to near $4,100, with silver up more than 3% above $50. WTI crude edged 0.4% higher to about $60.05, reflecting a modest demand tone, while bitcoin climbed 1.1% to roughly $105,900. The greenback eased against commodity-linked peers, with USD/CAD slipping toward 1.4000 as energy and metals supported the loonie.
Key Points: – Risk-on mood lifts European FX, equities, and commodities as traders expect a U.S. shutdown deal – Fed’s Daly signals openness to further rate cuts and notes a negative demand shock – ECB’s de Guindos says current interest rate levels are appropriate – BOJ urged to avoid a December hike; yen lags while AUD leads G10 FX – Eurozone Sentix confidence falls to -7.4; SNB sight deposits drop to CHF 460.0 bn – Gold nears $4,100, WTI holds around $60, bitcoin rises above $105,000, U.S. 10-year yields at 4.131%
