EURUSD, BoE, etc.

Oh, Germany

The narrative has flipped from German defense stimulus and fiscal ripper to: German export machine is dead, and nothing has changed. German bankruptcies are up, surveys show permanent contraction, and the fiscal stimulus hasn’t shown up yet outside RNMBY stock price. This chart from IWH shows German bankruptcies this year outpacing last year and way above the pre-COVID trend.

I think this paragraph from ING captured the situation nicely:

After the excitement and enthusiasm sparked by Germany’s fiscal policy U-turn and its decision to invest significantly in infrastructure and defense this spring, the summer brought a rude awakening. The mood in Germany soured and optimism ground to a halt – and not just because of US tariffs or a stronger euro, both of which complicate matters for the export industry. In fact, German policymakers are apparently just now waking up to the painful reality that readers of our research have heard endlessly over the last five years. A reality in which Germany has lost international competitiveness as a result of long-term underinvestment, a portion of naivety and arrogance, and China’s rise from export destination to system rival.

The question is whether or not this is priced in, and I would think it’s hard to make that argument with EURUSD at 1.1520, EURGBP at 0.8765 and EUR crosses generally closer to the highs, not the lows. Then again, maybe 2026 will bring the long-awaited fiscal zip. If it’s not priced into FX, it’s even less priced into yields as the Germany vs. USA spread is close to the tights (currently -1.44% vs. -2.30% at the start of the year).

Here is the FX vs. rates view from 15,000 feet:

Rate differentials haven’t been great this year as USDJPY has completely decoupled and the Liberation Day bond vigilante attack briefly flipped the corr. The technical story in EURUSD looks troubling as we have now dropped below both 100-day moving averages and the daily cloud. Note that we broke out of the cloud in late February 2025 at 1.0350 and stayed above it right up to 1.1900. Now, the MAs are rolling over and a correction to 1.1325/1.1400 looks likely. 1.1325 is the 200-day and 1.1400 is the triple bottom in late July.

Meanwhile, US 10-year yields look like they’ve found a base as corporate issuance to fund AI Capex has begun in earnest. A nice chart from BofA.

This week, we get some jobs data with JOLTS tomorrow and ADP on Wednesday. Given these are the best bits of labor market information we’re going to get, I would expect the market to overreact to them a tad. ADP is the most interesting as JOLTS is less timely September data while ADP reflects October. There is a chance there is some knock-on effect from the government shutdown into private payrolls, but that’s hard to predict. The last shutdown covered most of January 2019 and that ADP figure came in strong (213k vs. 181k expected).

We also get a flurry of central banks, with the RBA tonight, followed by Riksbank, Norges, and the Bank of England. There is some mystery around the Bank of England (25% chance of a cut priced), while the other three are expected to stay on hold. The voting has been all over the place with both dovish and hawkish dissents. See this grid from ING:

And the most recent survey from Bloomberg offers a number salad of possibilities at this meeting. See survey result in the table (29 respondents). You can see that 17% of economists put down a vote count that would lead to a rate cut, approximately matching the market pricing.

The RBA meeting, meanwhile, will be more about whether the RBA expresses the same optimism as the CEO of Westpac and/or concern about sticky and rising inflation, or sticks to a bit more dovish script. Either way, the market is pricing the end of RBA cuts and no hikes for ages. That is, the market has the RBA on hold for the foreseeable future.

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USD

I remain bullish USD, though there is quite a lot of risk from the data this week. There is also a huge flurry of Fed speakers, so I will keep an open mind. Overall, the hopes for a year-end seasonal really in currencies seem off the mark, the Europe story is fizzling for now, corporate issuance should keep US yields firm, and USDJPY and USDCAD both look like freight trains. If you are bearish EURUSD, sell 1.1540/80. I’m adding sell at 1.1569 (just head of the 100-day EMA) with a stop at 1.1711 (above last week’s high and the 100-day SMA) to the sidebar.

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Positioning

Positioning is moving more to the bullish USD side as the market has bailed on USD shorts but remains a bit tentative still about committing to dollar longs. CFTC data is still on hold. Momentum has turned super US positive.

The big strikes mostly come off Thursday with 1.14s, 1.15s and 1.1550 in EURUSD and mega 155s in USDJPY. I would expect USDJPY to trade very sticky at 155 as that level has been in the mind of the market for a while.

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Final Thoughts

1. The Spectra Markets merch store closes at EOD today and who knows when it will reopen.

Get your “What time is BOJ?” hoodie and a “It’s a bubble. / It’s a bubble!” shirt or a shirt that says “currencies.” “Currencies?” or “CURRENCIES!” before the lights go out.

https://spectramarkets.myshopify.com

2. In anticipation of America’s 250^th birthday, Ben Hunt asked me to write something, anything, about what America means to me. Here’s my poem.

https://www.panoptica.ai/and-yet/

3. One River paper on how long volatility works in a portfolio.

Have an improbable week.

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Trading Calendar for the week of November 3, 2025

Congratulations, Dodgers fans.

One of the most entertaining World Series ever.

This one is gonna sting for a  while.

good luck ⇅ be nimble