Instimatch - FX morning commentary - 11/3/25

Good morning

The data calendar is light again today with the main event the US JOLTS job openings data for January. The number of job openings is a key measure of labour demand for the Fed. Markets will also pay close attention to the NFIB's small business optimism survey given the ongoing political uncertainty and its negative impact on business confidence. On the EUR side, headlines surrounding the passage of the German fiscal package will remain at the centre of attention. Traders will also be listening to the ECB’s Rehn speak on the economic outlook and monetary policy. The EcoFin meeting of EU finance ministers will also be attended by the ECB’s VP de Guindos.

US and Ukrainian officials are meeting in Saudi Arabia today to discuss strategies to end the three-year conflict between Russia and Ukraine. Although Zelensky spoke with the Saudi Crown Prince yesterday, he will not attend today's meeting. However, he assured that Ukraine will participate constructively.

Severe risk-off and elevated volatility characterised a rough day for US markets. No Monday crash here, but certainly a slow grind move lower, extending from preliminary weakness last week. Only one way to go for US Treasuries on the back of this, as the 10yr homed in on the 4.2% area with markets now pricing for more than 3 Fed cuts this year.  The S&P 500 and NASDAQ falling sharply by 2.7% and 4% respectively, while non-US equities were not spared too with Eurostoxx and MSCI Asia declining by around 1.5%.  S&P 500 is now down -8.5% and we are therefore closing in on correction territory. NASDAQ is already there, down -12%. The USD index fell about 0.2% in Asian trade to 103.76.

EUR/USD remains in the 1.08-1.09 range trading around 1.0860 in a relatively quiet start to the week. Despite declining US yields amid US growth concerns, the broad USD remained well-supported during the US session on risk-off sentiment. In Germany, reports suggest the Greens may withhold support for the debt package in parliament, despite its alignment with their election platform. We still expect them to back it eventually. While much of the EUR-optimism appears priced in, confirmation of the debt package or a potential ceasefire deal in Ukraine could provide another boost. 

GBP/USD maintains position near $1.2900 as concerns over US economic growth persist.

For FX markets in particular, the impact of Trump’s tariffs is complicated as it is a relative and not an absolute asset class. Previous studies of three decades of Fed easing cycle on Asian FX markets shows that three factors matter most for Asian currencies – growth differentials, yield differentials, and risk sentiment. Asia FX will depend on the severity of Asia’s growth slowdown and also how much further risk appetite declines.  Traders right now seem to be positioning for Asian currency weakness in the near term.

The Japanese yen continues to benefit from safe haven demand, especially as recent data shows resilience in the Japanese economy. USD/JPY briefly dipped below 147 yen but opens the European session around 147.13 yen.

AUD/USD eased to around $0.6272 as a recent rebound from five-year lows ran out of momentum. Data showing an improvement in Australian consumer sentiment did little to buoy the currency. 

USD/CNY fell 0.2% to 7.2432 after the pair rose sharply on Monday following weak Chinese inflation data for February. The reading, which was released over the weekend, showed China continuing to grapple with deflation, despite promises of more government support. 

In what some are calling “China’s second Deepseek moment”, Manus AI was released in a limited fashion last week by Chinese start-up Monica, and is definitely something to watch closely, with interesting market and macro implications, including possibly calling into question the longer-term trend of US exceptionalism. Manus AI seems to be able to do a combination of deep research, synthesis, analytics, drawing insights, creation and outputs of dashboards and visualisations, operation of websites, and much more.