Market News

• UK Q2 final GDP +0.5% vs +0.4% q/q prelim
• Prior (Q1) +0.6%
• UK Q2 final GDP +1.4% vs +1.2% y/y prelim
• Prior (Q1) +0.9%

The breakdownIt is a mild revision higher to the initial estimate, reaffirming a more resilient UK economic picture in the second quarter. The services sector in particular held up relatively well, with output increasing by 0.6% during the quarter and estimated to be 1.7% higher compared with the same quarter a year ago.

As this is the final estimate though, it doesn't add much to the present outlook for BOE expectations. As things stand, inflation data will matter much more in terms of the impact toward market expectations and pricing.

What does the data measure?GDP measures the inflation-adjusted value of goods and services…

There are two notable expiry levels to watch out for on the day, as highlighted in bold below.

The first one is for EUR/USD at the 1.1300 level, with the strike sitting roughly 30 pips away from the spot price. The expiry size is meaningful and with price already relatively close, there may be some pull towards 1.1300 as the cut approaches. That especially if the dollar continues to push higher, with the selloff in Treasuries still underpinning the currency.

Just keep in mind though that the June low for EUR/USD at 1.1324 is a key technical consideration too. That is providing strong support on the daily chart, so sellers will have to decisively break that in trying to convince of a stronger push towards 1.1300.

But if EUR/USD pushes higher…

German inflation will be one of the main economic data points to watch out for in European trading today, with the September reading expected to show a further pick up in price pressures.

Here's what markets are looking for:

• CPI +3.1% y/y expected; Prior +2.9%
• HICP +3.2% y/y expected; Prior +2.9%

The August report already showed inflation accelerating to 2.9%, with energy prices rising 10.5% on the year and doing much of the heavy lifting. The key metric to keep an eye out for though is core CPI, and that was comparatively steadier at 2.4% in August.

Overall, another move higher in September would reinforce the narrative that headline inflation pressures are not going away just yet - particularly with elevated energy costs still feeding…

Economic data releases may take centre stage but if there's one other thing to be wary about today, it is month-end rebalancing. And with September also marking the end of the third quarter, there could be an extra layer of flow-driven volatility before trading wraps up for the month.

UBS' month-end rebalancing model is flagging USD/JPY as the standout sell signal this time around. The firm also argues that while the S&P 500 has outperformed its G10 equity peers this month, that hasn't translated into equally clear signals across the rest of the FX space. So besides the call on USD/JPY, UBS sees most other G10 pairs showing either weak or poorly aligned signals relative to equity performance.

Having said that, UBS did issue a caveat with…

• Goldman: Persian Gulf oil exports back at 2025 average after doubling in September
• USD/JPY slips to around 156.4 as half-year-end flows and Fed comments weigh
• China official manufacturing PMI returns to growth at 50.1, non-manufacturing 50.2
• RatingDog China manufacturing PMI 52.1 tops forecast, services 51.6 also beats
• Australia August CPI 4.0% as fuel jumps, trimmed mean below forecast at 0.2% m/m
• PBOC sets USD/ CNY mid-point today at 6.7351 (vs. estimate at 6.7025)
• ANZ survey: NZ business confidence eases to +52 as oil rise hits late responses
• Japan August factory output falls 1.7% against forecast rise, retail sales slow
• ICYMI: BlackRock says AI agents could be an overlooked source of crypto demand
• Oil: OPEC+ seen holding November quotas steady…

Goldman's estimate reinforces the supply-recovery theme that pushed Brent down circa 2.5% to around $103 on Tuesday, while WTI held below $90 on Wednesday and remains on course for a third straight monthly gain. Goldman said in a late-August note that rising dark flows could moderate the upside for crude even if Middle East disruption lasts longer, and the latest figures lend that view more weight. The same note argued that refined products and European gas had more upside than crude in a persistent disruption, which fits the market's focus on diesel. The main risk to the recovery story is diplomatic, since stalled US-Iran talks and reports that Washington could return to major combat after the midterms leave a tail risk in the price.

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Half-year-end flows (itsd Japan FY half year end today) are the dominant driver here, and moves of this kind can reverse once the new fiscal half begins, so the yen's gain may prove less durable than the size of the fall suggests. The backdrop of official comments has made traders wary of pushing USD/JPY higher, and the pair had been near the upper end of its recent range before the drop. The Fed's Williams saying there is no urgency for another hike removed a little support from the dollar, though US yields remain high and hike expectations are still firm. The Bank of Japan's own path is the other swing factor, with the market debating whether it moves again in October.

The yen strengthened as Japan's fiscal half-year end drove heavy…

A return to growth in the official manufacturing survey, alongside a jump in the non-manufacturing index, gives China-sensitive assets a supportive final data point before the holiday. Factory strength matters for industrial commodities, including oil, and RatingDog's finding that manufacturers' input costs are being pushed up by metals and oil suggests demand for those inputs is holding up. Still, the official readings sit close to the 50 line and domestic demand remains weak, so the market is likely to keep looking to policy support for further upside. The gap between the official 50.1 and the private-sector 52.1 will also draw attention, since it leaves the strength of the recovery open to debate.

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China's official PMIs moved back…

Stronger readings from both surveys, ahead of a week-long Chinese holiday, give China-sensitive assets a supportive last data point before mainland markets close. The rise in manufacturers' input costs, driven by metals and oil, is the detail most relevant to commodity markets, since it suggests firms are absorbing higher energy and raw material prices rather than cutting purchases. Services firms cut selling prices at the fastest rate in almost four and a half years, which points to margin pressure and to deflationary competition in the sector even as activity picks up. Traders are likely to weigh these private-sector readings against the official surveys, and the gap between the two sets of data will matter for how much of the…

The Australian dollar was lower after the data, as the softer-than-expected monthly trimmed mean reading was seen as the more encouraging signal for inflation. The market is pricing only around a 25% chance of a November hike, well below Westpac's stated base case that the RBA follows up next month, which suggests the market does not see another move as urgent. The risk for the currency is that fuel costs keep pressure on prices, since headline inflation at 4.0% and trimmed mean at 3.6% both sit well above the RBA's 2% to 3% target band. Diesel prices are the key watch point given how widely it feeds through the economy.

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Background:

• Australia CPI preview: headline inflation seen at 4.0% after RBA hike

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Australian headline inflation hit…

I'll have details and implications posted separately.

S&P Global / RatingDog PMIs, September:

Manufacturing 52.1

• expected 51.6, prior 51.5

Services 51.6

• expected 51.1, prior 51.4

Background:

• China PMIs preview: official manufacturing seen back above 50 before holiday

I'll have details and implications posted separately.

National Bureau of Statistics PMIs (September):

Manufacturing 50.1

• expected 50.1, prior 49.8

Non-Manufacturing 50.2

• expected 49.3, prior 49.00

Composite 50.7

• prior 49.5

Background:

• China PMIs preview: official manufacturing seen back above 50 before holiday