The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0857 ET - Worries over France's public finances and poor risk sentiment should continue to support the safe-haven Swiss franc against the euro, Danske Bank's Kirstine Kundby-Nielsen says in a note. Danske expects the European Central Bank and Federal Reserve to raise interest rates less than markets anticipate, providing additional support to the low-yielding franc. The Danish bank expects the Swiss National Bank to raise the policy rate twice in 2027, in line with market pricing. The euro falls 0.1% to 0.9254 francs and Danske targets 0.91 in 12 months. "The key risk is FX intervention from the SNB to weaken the franc and investors returning to the franc as their preferred funding currency," Kundby-Nielsen says.(renae.dyer@wsj.com)
0827 ET - Sterling could turn weaker against the euro after recent gains driven by U.K. interest-rate rise expectations and French fiscal risks, Danske Bank's Kirstine Kundby-Nielsen says in a note. The U.K. economy remains fragile and there is scope for Bank of England rate-rise bets to revert lower to a larger extent than for the European Central Bank, she says. U.K. fiscal sustainability concerns have taken a backseat but "we are attentive to budget risks ahead of the autumn statement" on October 28. The U.K. also runs a large current account deficit which makes sterling vulnerable when capital inflows fade and risk appetite sours, she says. Danske expects the euro rise to 0.88 pounds in six-12 months compared to 0.8382 currently. (renae.dyer@wsj.com)
0826 ET - Rising natural gas prices and French fiscal concerns have weakened the euro versus the dollar this month and further falls look likely, Danske Bank's Antti Ilvonen says a note. Stronger U.S. domestic demand, the eurozone-U.S. monetary policy outlook and elevated energy prices favor a lower euro-dollar, he says. The European Central Bank could deliver one final rate rise in December but end tightening 50 basis points below market pricing, he says. The Federal Reserve should raise rates in December and March, about 25bps below pricing. French fiscal risks could constrain the ECB's ability to raise rates, he says. Danske lowers its 12-month euro forecast to $1.10 from $1.12 previously. The euro trades flat at $1.1233. (renae.dyer@wsj.com)
0756 ET - The Canadian dollar has limited scope to rise further against the U.S. dollar as the U.S. economy is expected to continue outperforming Canada, Societe Generale's Kit Juckes says in a note. The International Monetary Fund expects 1.7% economic growth in Canada next year compared to 2.3% for the U.S. A significant rally in the Canadian dollar versus the U.S. dollar will "likely require a meaningful narrowing of the growth gap and, by extension, a substantial reduction in the interest-rate differential," Juckes says. The U.S. dollar falls 0.1% to 1.4040 Canadian dollars, having reached a four-week low of 1.4030 Tuesday, LSEG data show. (renae.dyer@wsj.com)
0753 ET - The surge in eurozone government-bond yields and equity-market selloff have tightened financial conditions, but systemic risks remain low, according to analysts at Oxford Economics. This reduces pressure on the European Central Bank to intervene through sovereign bond purchases. "Instead, the situation can for now be managed by less hawkish rhetoric, easing the amount of policy tightening that markets price in," they say. Wider bond spreads are likely to be viewed as useful pressure on France and other fiscally weak governments to consolidate their finances, rather than a trigger for ECB action. Stronger institutions and healthier bank and private-sector balance sheets also limit contagion risks, the analysts note. "We see bond purchases as a last resort." (don.forbes@wsj.com)
0744 ET - Canadian monthly credit aggregates highlight an ongoing slowdown in the economy's most interest-rate sensitive sector just as the Bank of Canada could be looking more closely at lifting interest rates, Bank of Montreal's Shelly Kaushik notes. Household mortgage debt in August grew 3.8% on-year, the slowest pace since the housing correction in 2023-24. Kaushik says the housing market isn't exactly in need of extinguishing, and a new tightening cycle by the central bank could add payment stress to variable-rate mortgage holders. And that's something policymakers will contemplate as they consider whether to raise rates next week, the economist says. (robb.stewart@wsj.com; @RobbMStewart)
0735 ET - The euro's recent selloff against the dollar has probably gone too far if Europe avoids another sovereign debt crisis, FxPro's Alex Kuptsikevich says in a note. "Despite France's debt burden rising to 119% of gross domestic product, the currency bloc's overall debt burden has fallen since the Greek crisis, now standing at a manageable 89%." If the risks of another eurozone debt crisis are exaggerated and the Federal Reserve pauses rate rises until December, the euro could recover, he says. Furthermore, the Democrats could gain control of Congress following November's midterm elections which could disrupt President Trump's inflationary policies, he says. The euro falls 0.1% to $1.1224, having reached a 17-month low of $1.1112 last week, according to LSEG. (renae.dyer@wsj.com)
0702 ET - Sterling's rally is looking stretched and there is a growing risk of a downward correction versus the euro and the dollar, ING's Francesco Pesole says in a note. While French fiscal risks are helping sterling's appreciation versus the euro, the U.K. currency is emerging as an outperformer in the G-10, he says. Markets are "sinking their teeth" into a positive U.K. growth story, Bank of England tightening bets and expectations next week's budget won't deliver any major surprises. However, more than 100 basis points of rate rises priced by June look excessive, he says. Sterling rises 0.1% to $1.3394. The euro falls 0.2% to 0.8379 pounds after hitting a near 17-month low of 0.8370 earlier, according to LSEG. (renae.dyer@wsj.com)
0636 ET - Sterling rises to a near 17-month high against the euro and turns higher against the dollar. Data earlier Wednesday showed U.K. headline and core inflation both rose more than expected in September to 3.5% and 2.8% respectively, adding to the case for the Bank of England to raise interest rates. Meanwhile, concerns about French debt and social unrest provide additional support to sterling against the euro. These worries widened yields between 10-year French and German government bond yields to 158.98 basis points, the highest since late 2011, LSEG data show. The euro falls to as low as 0.8370 pounds. Sterling rises to $1.3394 even as the dollar stays higher. (renae.dyer@wsj.com)
0618 ET - The Swiss franc could extend its appreciation against the euro on French risks as it benefits from its safe-haven status, ING's Francesco Pesole says in a note. Lingering concerns about the French budget are being compounded by rising social unrest, he says. "With euro-dollar affected by softish dollar momentum, euro-franc remains the clearer exhaust valve of French risk into FX." The euro falls 0.1% to 0.9254 francs, having reached a three-month low of 0.9224 on Monday, according to LSEG. ING sees a risk of the euro falling below 0.9200 francs if it breaks below support around 0.9230. (renae.dyer@wsj.com)
0618 ET - Financial products offered by Chinese financial institutions are growing faster than retail deposits, Moody's Ratings says in a commentary. It estimates that outstanding balances of these products rose 15.5% in 2025, accelerating from 13.9% in 2024, citing data from asset managers and Chinese regulators. Retail deposit growth in the nation slowed to 9.7% from 10.4% over the same period. "Most of the underlying investments are liquid standard assets, such as bonds and money market funds, rather than illiquid nonstandard credit assets," it says. (tracy.qu@wsj.com)
0616 ET - Lingering concerns over debt-funded AI investments have seemingly left the dollar more vulnerable to any falls in oil prices, ING's Francesco Pesole says in a note. Rising concerns about tech stocks have challenged U.S. interest-rate rise bets, providing more flexibility for rate expectations to adjust lower in the case of lower oil prices, he says. The balance of risks have shifted towards a softer dollar, he says. "Even so, we continue to favor a gradual and orderly dollar decline rather than a sharper depreciation." The continued prospect of Federal Reserve tightening and elevated oil prices remain supportive, he says. The DXY dollar index rises 0.1% to 101.791 after hitting a near three-week low of 101.506 Tuesday when oil prices slipped.
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