Morning Briefing: Dollar gains, oil falls. EURUSD at multi-month lows

🌍 Macroeconomics

• Bank of Japan Deputy Governor Shinichi Uchida described the development of artificial intelligence technology as a significant positive demand shock that supports economic activity and exerts upward pressure on prices.
• He also emphasized that increased debt issuance by tech entities has boosted long-term bond yields, forcing the Bank of Japan to constantly monitor the impact of innovation on monetary policy parameters and the output gap.
• Activity in the services sector across the Asia-Pacific region shows signs of slowing down amid persistent inflationary pressure.
• The final Services PMI for Japan declined in September to 51.3 pts, indicating a deceleration in the pace of expansion, while the Australian services index slowed to 51.9 pts, accompanied by a return to job cuts in local companies.
• In contrast, economic activity in Middle Eastern economies remains solid — the Saudi Composite PMI rose to 55.3 pts, and the reading for the United Arab Emirates maintained a stable value of 55.3 pts.
• Markets eagerly await the release of the minutes from the latest Federal Reserve meeting, which will test committee members' resolve to carry out another interest rate hike.
• Recent weaker data from the US labor market weakened the likelihood of policy tightening in October; however, persistent elevated Treasury yields remain a key source of pressure for global financial markets.

⚔️ Geopolitics

• The security situation in the Middle East remains tense following statements by Houthi rebels in Yemen claiming missile and drone strikes against oil installations owned by Saudi Aramco in Riyadh and Khurais.
• Although Saudi Arabia has not officially confirmed these reports, Yemen's internationally recognized government announced the launch of a large-scale military operation aimed at regaining control over territories held by the militants.
• In the face of direct retaliatory threats from Tehran, US command ordered a preemptive withdrawal of all B-1 strategic bombers previously stationed at the British RAF Fairford base.
• Berlin declared a significant expansion of support for Kyiv ahead of the upcoming winter season. German Chancellor Friedrich Merz announced a military assistance package worth approximately €1 billion and the allocation of an additional €350 million for the reconstruction and protection of Ukrainian energy infrastructure.
• Concurrently, talks are ongoing regarding the transit of liquefied natural gas from German terminals to Ukrainian underground storage facilities, while Brussels considers potential restrictions on Kyiv's access to EU agricultural subsidies following possible accession.
• India's Finance Minister criticized Washington's trade policy, indicating that US tariffs are being instrumentally used as leverage extending beyond standard agreement mechanisms.
• Authorities in Delhi assess that negotiations on a bilateral trade agreement have reached an impasse, where offering further concessions by the Indian side will be exceptionally difficult.

📈 Stock Markets

• Optimism around tech companies dominated the start of the week on Asian trading floors, where Japan's Nikkei 225 index gained 2.5% to reach three-month highs on growing demand for AI-related assets. Similar sentiment prevailed in the Taiwanese stock market, whose main index rose over 2%, supported by strong semiconductor sector orders.
• In M&A activity, a major transatlantic deal was struck. French group Schneider Electric announced the acquisition of US engineering software maker PTC in a transaction valued at over $20 billion, aiming to expand its footprint in industrial digitalization.
• Friday's Wall Street session ended with solid gains: the Nasdaq 100 set a new record close (+1.00% to 30,807.9 pts), the Nasdaq Composite added 1.19% (27,190.9 pts), the S&P 500 rose 0.74% (7,722.8 pts), the Russell 2000 added 0.94% (2,832.9 pts), and the Dow Jones gained 0.49% (51,182.1 pts).
• The catalyst for buying was a significantly weaker-than-expected US labor market report, which reduced fears of another rate hike by the Fed in October, although bond yields reversed lower early moves late in the day to finish above 5.29% for 10-year Treasuries.
• This morning, US index futures are modestly pulling back from Friday's gains
• US500 trades around 7766.8 pts (-0.12%), US100 fluctuates near 31,046.9 pts (0.00%), US30 drops about -0.18% to 51,388.0 pts, and US2000 declines -0.20% toward 2846.1 pts.

🛢️ Commodities

• Crude oil prices started the new week on a lower note, sliding toward $101.60 per barrel of Brent.
• Downward pressure was driven by a coordinated G7 decision to release 100 million barrels from strategic reserves alongside recovering exports from the Persian Gulf, more than offsetting market concerns regarding military incidents near shipping lanes.
• Sentiment was further cooled by an unexpected decision from Saudi Aramco, which cut November official selling prices for Arab Light crude to Asian buyers by $3, pushing them to their deepest discount since mid-2020. Earlier, the OPEC+ alliance decided to leave existing production limits unchanged.
• Gold remains in a local consolidation phase below recent record highs, facing pressure from a stronger US dollar and Treasury yields. However, several financial institutions view current levels as attractive given gold's underweight positioning in portfolios, noting the ongoing retention of physical metal by Asian producers.
• As of 07:28 CET, gold is trading near 4,136, down 0.08% on the day and down 0.08% on the week, while Brent crude trades near 101.60, down 1.09% on the day and down 1.09% on the week.

💱Forex Market

• The US dollar is strengthening against a basket of major currencies, pushing EURUSD to its lowest level since May 2025.
• The single currency is under clear pressure due to a rising risk premium in the French government bond market and reports of potential snap parliamentary elections in Spain.
• In this environment, analysts point to growing risks of eurozone fragmentation, forecasting further weakness in the European currency relative to the yen.
• The USDJPY pair is consolidating near the 158.00 level, remaining unfazed by hawkish rhetoric from Japanese government officials.
• Although the Finance Minister declared full readiness for a response coordinated with the US against excessive volatility, investors are holding off on significant yen appreciation until clear signals emerge from the central bank. Sterling also surrendered to US dollar pressure, sliding toward 1.3200.
• As of 07:28 CET, EURUSD is trading near 1.1186, down 0.57% on the day and down 0.57% on the week, while USDJPY is near 158.00, up 0.1% on the day and up 0.1% on the week.

🪙 Cryptocurrencies

• The digital asset market is seeing calmer conditions following a September rally driven by ETF inflows. In market infrastructure news, a joint venture between the OKX exchange and NYSE owner ICE filed for registration of a platform enabling 24/7 trading in tokenized US equities, aligning with the ongoing integration of traditional finance with blockchain technology.
• As of 07:28 CET, Bitcoin is trading near 85,401, down 0.41% on the day and down 0.41% on the week.