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Daily Pivots: (S1) 0.9249; (P) 0.9277; (R1) 0.9293; More...

EUR/CHF's is still in progress and intraday bias stays on the downside. Current development suggests that consolidation from 0.9218 has completed with three waves to 0.9452, and larger down trend is resumption. Further fall should be seen through 0.9204/18 support zone to 61.8% projection of 0.9660 to 0.9218 from 0.9452 at 0.9179 next. On the upside, above 0.9303 minor resistance will turn intraday bias neutral first.

In the bigger picture, the down trend from 0.9204 (2018 high) might still be in progress considering that EUR/CHF is staying well inside the long term falling channel. Bearishness is reaffirmed by rejection at 55 W EMA (now at 0.9405). Firm break of 0.9204 will confirm down trend resumption. Next target is 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851.

Safe-haven demand is dominating global markets as traders head into the final trading day of the week. Gold has surged past 4,300 mark to a new record high, putting it on track for its best weekly performance in five years, while the Swiss Franc is rallying sharply across the board. The flight to safety reflects deepening concerns about financial stability and the global outlook as investors seek shelter from mounting geopolitical and economic uncertainty.

The latest catalyst came from a renewed wave of anxiety over the U.S. regional banking sector, after a string of lenders disclosed rising bad loans. The headlines have revived memories of the mini banking crisis in 2023, which began with the collapse of Silicon Valley Bank, followed soon after by Signature Bank and First Republic Bank. The unease comes just as markets grapple with a series of unresolved macro risks that continue to weigh on sentiment.

Among those, U.S.–China trade tensions remain front and center, with no visible progress toward de-escalation before the November 1 deadline for 100% tariffs. Both sides have hardened their rhetoric, leaving investors uncertain about whether negotiations will resume or break down completely. The lack of clarity is amplifying volatility across equities and commodities, while reinforcing demand for traditional safe havens.

Adding to the fog, the U.S. government shutdown continues with no resolution in sight, delaying key economic data releases and leaving policymakers and investors without a reliable read on the economy—especially on the labor market. The blackout has made it harder for traders to assess whether growth is holding up or slipping, further encouraging defensive positioning in the absence of clear signals.

For the week so far, Swiss Franc leads as the strongest major currency, rebounding after a brief pullback yesterday. Euro and Yen also gained on safe-haven flows. Loonie lags behind, hit by weaker risk appetite and falling oil prices. Dollar, Aussie, and Kiwi are also under pressure, with Sterling trading mid-pack. Sentiment is not yet in freefall, but with nerves running high and multiple risks unresolved, markets are increasingly vulnerable to a sharper turn south.

In Asia, at the time of writing, Nikkei is down -1.58%. Hong Kong HSI is down -1.84%. China Shanghai SSE is down -1.27%. Singapore Strait Times is down -0.55%. Japan 10-year JGB yield is down -0.033 at 1.624. Overnight, DOW fell -0.65%. S&P fell -0.63%. NASDAQ fell -0.47%. 10-year yield fell -0.070 to 3.976.

US 10-year yield breaks 4% on bank fears, watch 3.9% as market stress builds

U.S. 10-year Treasury yield tumbled decisively below the 4.00% mark overnight, hitting its lowest level since April and flashing renewed signs of market stress. The next key support lies at around 3.9%, where some stabilization should occur. However, decisive break below 3.9% would be a serious warning signal that could trigger an accelerated decline toward 3.70%, signaling a sharp escalation in risk aversion.

The sharp drop was driven by flight to safety following unsettling developments in the U.S. regional banking sector. Shares of Zions Bancorporation and Western Alliance plunged after both lenders revealed unexpected bad loans, igniting fears of loose credit standards and potential contagion across smaller financial institutions. The news came on the heels of two recent auto industry-related bankruptcies, which have amplified concerns about tightening credit conditions and balance sheet vulnerabilities.

Markets now turn to Friday’s wave of regional bank earnings, seen as the next test of sector stability. Investors will be watching closely to gauge whether the problem is contained or spreading. A weak showing could deepen risk aversion and accelerate the rush into Treasuries, further suppressing yields.

Technically, 10-year yield’s fall from the recent peak of 4.629 resumed with conviction after breaking below 3.992 support. Next near term target lies at 61.8% projection of 4.493 to 4.205 from 4.200 at 3.891. Some stabilization should emerge there, at least on the first attempt.

However, decisive break below 3.891 would raise the risk of a deeper slide toward 100% projection at 3.699. A bounce from the 3.900 area could still restore some calm — but failure to hold that line risks triggering a deeper wave of safe-haven buying across the Treasury curve.

Fed's Kashkari sees inflation as stubborn but not dangerous

Minneapolis Fed President Neel Kashkari said overnight that the balance of risks in the U.S. economy has shifted, with greater danger of a labor market slowdown than of a sharp rebound in inflation. Neveretheless, he added that while policymakers may be leaning toward the view that the economy is weakening, “we’re more likely betting that the economy is really slowing more than it really is.”

Kashkari downplayed fears of inflation reaccelerating to 4% or 5%, noting that the arithmetic of tariff effects does not support such a scenario. Instead, he described the main concern as “persistence”, with price pressures potentially staying near 3% for "an extended period" rather than spiking.

He also addressed the impact of the ongoing government shutdown, saying that while the lack of official data complicates decision-making, Fed officials still have access to timely private indicators and feedback from business outreach.

“We can make our way through while the shutdown is happening,” Kashkari said. “But the longer it goes on, the less confidence I have that we are reading the economy appropriately.”

ECB's Lagarde: Well positioned to weather future shocks

Speaking at an IMF event, ECB President Christine Lagarde said the Eurozone economy has reached a point of relative stability, with inflation now close to the ECB’s 2% goal. “We are in a good place, and we are well positioned to face future shocks,” she said.

Lagarde cautioned, however, that several unpredictable risks remain on the horizon, from trade-related frictions to the continuing conflict in Ukraine. She said that while uncertainty is still elevated, some feared disruptions “were not as bad as we had anticipated.”

Ueda signals watchful patience as BoJ weighs October policy options

BoJ Governor Kazuo Ueda reiterated overnight that the central bank will consider rate hikes "if our confidence in hitting the outlook increases”. He added that he intends to continue gathering informations before making any decisions at the October 29–30 policy meeting.

Ueda observed that G20 members regard the world economy as broadly stable but facing persistent risks, from trade disputes to geopolitical frictions. "Many institutions and observers still factor them into their outlooks, or at least treat them as downside risks when assessing the global and U.S. economies,” he said.

EUR/CHF Daily Outlook

Daily Pivots: (S1) 0.9249; (P) 0.9277; (R1) 0.9293; More...

EUR/CHF's is still in progress and intraday bias stays on the downside. Current development suggests that consolidation from 0.9218 has completed with three waves to 0.9452, and larger down trend is resumption. Further fall should be seen through 0.9204/18 support zone to 61.8% projection of 0.9660 to 0.9218 from 0.9452 at 0.9179 next. On the upside, above 0.9303 minor resistance will turn intraday bias neutral first.

In the bigger picture, the down trend from 0.9204 (2018 high) might still be in progress considering that EUR/CHF is staying well inside the long term falling channel. Bearishness is reaffirmed by rejection at 55 W EMA (now at 0.9405). Firm break of 0.9204 will confirm down trend resumption. Next target is 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851.

Key Highlights

• USD/JPY started a downside correction from the 153.25 zone.
• A key bearish trend line is formed with resistance at 151.70 on the 4-hour chart.
• EUR/USD started a recovery wave above 1.1600 but faces hurdles.
• Gold rallied to a fresh all-time high above $4,260 and seems unstoppable.

USD/JPY Technical Analysis

The US Dollar failed to stay above 153.00 against the Japanese Yen and corrected gains. USD/JPY traded below 152.50 and 152.00.

Looking at the 4-hour chart, the pair traded below the 38.2% Fib retracement level of the upward move from the 146.58 swing low to the 153.27 high. Besides, there is a key bearish trend line formed with resistance at 151.70.

On the downside, the pair might find support at 150.00 and the 100 simple moving average (red, 4-hour). It coincides with the 50% Fib retracement level of the upward move from the 146.58 swing low to the 153.27 high.

The main support might be 149.00 and the 200 simple moving average (green, 4-hour). A close below 149.00 could start a major pullback toward 148.20. Any more losses might open the doors for a test of 146.50.

On the upside, the pair faces resistance near the 151.50 level. The next hurdle could be near the trend line at 151.70. A close above the trend line resistance might push the pair to 152.50.

Looking at EUR/USD, the pair started a recovery wave, but the bears might remain active near the 1.1700 and 1.1720 levels.

Upcoming Key Economic Events:

• US Housing Starts for Sep 2025 (MoM) – Forecast 1.330M, versus 1.307M previous.
• US Building Permits for Sep 2025 (MoM) – Forecast 1.340M, versus 1.312M previous.

U.S. 10-year Treasury yield tumbled decisively below the 4.00% mark overnight, hitting its lowest level since April and flashing renewed signs of market stress. The next key support lies at around 3.9%, where some stabilization should occur. However, decisive break below 3.9% would be a serious warning signal that could trigger an accelerated decline toward 3.70%, signaling a sharp escalation in risk aversion.

The sharp drop was driven by flight to safety following unsettling developments in the U.S. regional banking sector. Shares of Zions Bancorporation and Western Alliance plunged after both lenders revealed unexpected bad loans, igniting fears of loose credit standards and potential contagion across smaller financial institutions. The news came on the heels of two recent auto industry-related bankruptcies, which have amplified concerns about tightening credit conditions and balance sheet vulnerabilities.

Markets now turn to Friday’s wave of regional bank earnings, seen as the next test of sector stability. Investors will be watching closely to gauge whether the problem is contained or spreading. A weak showing could deepen risk aversion and accelerate the rush into Treasuries, further suppressing yields.

Technically, 10-year yield’s fall from the recent peak of 4.629 resumed with conviction after breaking below 3.992 support. Next near term target lies at 61.8% projection of 4.493 to 4.205 from 4.200 at 3.891. Some stabilization should emerge there, at least on the first attempt.

However, decisive break below 3.891 would raise the risk of a deeper slide toward 100% projection at 3.699. A bounce from the 3.900 area could still restore some calm — but failure to hold that line risks triggering a deeper wave of safe-haven buying across the Treasury curve.

Minneapolis Fed President Neel Kashkari said overnight that the balance of risks in the U.S. economy has shifted, with greater danger of a labor market slowdown than of a sharp rebound in inflation. Neveretheless, he added that while policymakers may be leaning toward the view that the economy is weakening, “we’re more likely betting that the economy is really slowing more than it really is.”

Kashkari downplayed fears of inflation reaccelerating to 4% or 5%, noting that the arithmetic of tariff effects does not support such a scenario. Instead, he described the main concern as “persistence”, with price pressures potentially staying near 3% for "an extended period" rather than spiking.

He also addressed the impact of the ongoing government shutdown, saying that while the lack of official data complicates decision-making, Fed officials still have access to timely private indicators and feedback from business outreach.

“We can make our way through while the shutdown is happening,” Kashkari said. “But the longer it goes on, the less confidence I have that we are reading the economy appropriately.”

BoJ Governor Kazuo Ueda reiterated overnight that the central bank will consider rate hikes "if our confidence in hitting the outlook increases”. He added that he intends to continue gathering informations before making any decisions at the October 29–30 policy meeting.

Ueda observed that G20 members regard the world economy as broadly stable but facing persistent risks, from trade disputes to geopolitical frictions. "Many institutions and observers still factor them into their outlooks, or at least treat them as downside risks when assessing the global and U.S. economies,” he said.

Speaking at an IMF event, ECB President Christine Lagarde said the Eurozone economy has reached a point of relative stability, with inflation now close to the ECB’s 2% goal. “We are in a good place, and we are well positioned to face future shocks,” she said.

Lagarde cautioned, however, that several unpredictable risks remain on the horizon, from trade-related frictions to the continuing conflict in Ukraine. She said that while uncertainty is still elevated, some feared disruptions “were not as bad as we had anticipated.”

History suggests that waves of technological innovation take time to show up in productivity, with users not producers reaping the spoils. Productivity pessimism in Australia should not last forever.

• Like the computer revolution before it, the AI revolution is likely to boost productivity and potential output growth, but this could take a while.
• Assuming potential output growth remains as weak in coming years as it was in the ‘secular stagnation’ era of the first couple of decades this century is justifiable in the short run. Over time, though, some pick-up should be expected, unless one is willing to make some strong assumptions about Australia’s economic performance and AI adoption.
• Potential output growth and other latent quantities are hard to estimate and even harder to detect changes in real time. Focusing on prices rather than extracting trends from quantities may be more fruitful. The risk is that productivity pessimism breeds policy error.

We are frequently asked how Australia might boost its productivity growth and so its living standards. We are also frequently asked our view of the implications of genAI and large language models. These questions are mostly about the medium term but the underlying beliefs also have implications for macroeconomic policymaking in the short term.

A little historical background is in order here. Australia, and most of the rest of the Western world, experienced a boom in productivity growth in the late 1990s associated with the adoption of computers and the internet. That episode held two lessons. First, it took time for a new wave of technology to be fully adopted and embedded in business models and processes. That is why it initially seemed that the computer revolution had not boosted productivity – recall leading US economist Bob Solow’s 1987 quip that “You can see the computer age everywhere but in the productivity statistics”. Second, most of the gains went to the users, not the producers of the new technologies. Indeed, productivity growth was higher in Australia than in the US over the late 1990s, as the then RBA Governor Ian Macfarlane pointed out at the time.

As that wave of technological innovation crested and matured, productivity growth slowed globally. The gains from adoption had been reaped. Moreover, the new technologies introduced in the first couple of decades of this century – specifically social media – were seemingly more likely to distract us than make us more productive. They are also more prone to the network effects that direct the gains to the platform operator rather than the users, limiting the boost to productivity.

Even when the earlier generation of innovations that culminated in what we now know as AI were introduced – machine learning models and data science techniques – the productivity gains were hard to see. Part of the issue is that that generation of technologies was essentially an exercise in combining people with PhDs in physics or maths with computers to generate a machine-learning model to replace, say, an insurance adjuster with a high-school or undergraduate education. A technology that requires rarer skills than the ones it seeks to replace is rarely successful in gaining broad adoption.

It was therefore perhaps not surprising that measured productivity growth slowed around the world starting from the early 2000s. The economics profession was worried about the possibility of ‘secular stagnation’, and some believed that “diminishing returns in the digital revolution” were causing the slowdown in productivity growth, at least in the US. (There were other, demand-side, causes proposed as well. But the lack of technological innovation did seem to be a large part of the story.)

Roll forward to the last couple of years and we are now starting to see the next generation of machine learning applications – LLMs and other approaches based on transformer architectures. These are more accessible to end-users than their predecessors and hold out more of an opportunity to remodel business models and processes to take advantage of this. For this reason, most observers, including the IMF, expect at least some productivity boost from this new technology wave. Like the previous technology wave from PCs and the internet, this boost could take a while to come through. It might not be as slow as that previous wave, though, given that internet distribution itself speeds adoption.

The RBA’s revised assumptions about trend growth in labour productivity, and so potential output growth, released in their August Statement on Monetary Policy and elaborated on in a recent speech by its chief economist, need to be seen in that context. Effectively, what the RBA has done is use a 20-year average of productivity growth as the trend to which actual labour productivity growth is assumed to converge over the next two years. A 20-year horizon for this average cuts out all of the 1990s productivity boom from the calculation: it is a pure ‘secular stagnation’ era average.

And that might well be the right assumption for the next couple of years. If it takes a few years for AI to boost productivity across the economy, then this will not be clearly evident until the period beyond the RBA’s current forecast horizon. But for it to still be the trend rate of labour productivity growth much beyond that, one must believe one of two things. Either one must believe that AI will do nothing to boost overall productivity growth – in which case, sell your Nvidia stock now! (This is of course not investment advice, simply the logical implication of that belief.) Or, one must believe that AI will boost productivity growth elsewhere, but for some reason not in Australia. This seems like a stretch, or at least an argument that needs to be justified explicitly.

The RBA has assured the public that it does not assume that the slower productivity growth assumption applying to the next two years will remain the case over subsequent years, and that it will update its view as the data evolve. Observers are entitled to ask how the RBA proposes to do this, noting the backward-looking nature of many of its models for estimating these ‘star’ variables, and whether it will be nimble enough in updating its view. We recall the decline in estimated rates of feasible unemployment (the NAIRU) over the 2010s in a range of advanced economies and reflect that these are hard calls to make in real time.

An implication of the RBA’s view on growth in productivity, and so potential output, is that for the time being at least, signs of stronger GDP growth will by default be interpreted as demand outstripping supply, and so a reason to keep policy a bit tight. Such an interpretation will be vulnerable to any pick-up in productivity stemming from AI or other technological or structural shifts. It will also be vulnerable to the RBA’s apparent assumption that the five-decade upward trend in labour force participation – and so labour supply – is at an end. As Westpac Economics colleague Ryan Wells and I noted last month, we think the trend still has some way to run in Australia.

Given the difficulties of assessing things like potential output growth, a more robust way to judge whether output is running faster than capacity is to watch inflation. Likewise, a pick-up in wages growth is likely to be more of a sign of a tight labour market than whether the rate of wages growth exceeds some rule of thumb based on an assumed rate of trend productivity growth. Without these price-based signals, it is hard for policymakers to be confident that a shift in a quantity-based measure like output is a sign of a shift around trend, or a shift in the trend.

Indeed, while we wouldn’t want to make too much of one month’s figures, this week’s labour market data was entirely consistent with our medium-term view that there is a bit more trend growth in labour supply available than some observers assume. As has so often been the case over the past couple of years, it will again all come down to the quarterly underlying inflation print later this month. And while that print will be a high one, this might not continue in following quarters. The RBA’s guiding assumptions make it more prone to productivity pessimism and structural hawkishness that could be repeatedly corrected by lower-than-expected inflation outcomes. It’s a heck of a way to manage the economy.

Key insights from the week that was.

In Australia, the September Labour Force Survey was one of two key data releases in the run-up to the RBA’s November decision. The release points to a bit more labour market slack building during the month. Employment printed in line with Westpac’s forecast (+15k), extending an easing in the growth pace amid an underlying slowdown in ‘care economy’ jobs. However, this gain only partially made use of the increase in the size of the labour force as the participation rate lifted back up to its year-average of 67.0%. The unemployment rate consequently jumped from 4.3% to 4.5%, the highest rate since just after the ‘delta’ outbreak of 2021.

Compared to the RBA’s August forecasts, employment is already on a weaker footing, and the unemployment rate now looks likely to overshoot their projections. This lends weight to our view that there is still a good chance the RBA will cut rates in November – a view supported by the swift reaction in market pricing, the chance of a 25bp November cut lifting from 40% to 78%. That said, the Q3 CPI (due October 29) will be the ultimate determinant of the November decision.

In the meantime, the latest NAB business survey points to an ongoing recovery in economic growth – business conditions holding steady in September around the long-term average, allowing confidence to start moving up from ‘neutral’ to ‘cautiously optimistic’. Our latest Market Outlook delves into our updated economic growth forecasts and the tension with a softening labour market – ‘jobless growth’ being a key risk as aggregate activity becomes less reliant on the job-intensive care economy.

In the US, with almost all official data indefinitely delayed due to the government shutdown, the Fed’s Beige Book was the key release. Contacts across the districts reported that overall economic activity was perceived to have "changed little on balance since the previous report" but that "consumer spending, particularly on retail goods, inched down in recent weeks". "The outlook for future economic growth varied by District and sector. Sentiment reportedly improved in a few Districts, with some contacts expecting an uptick in demand over the next 6 to 12 months. However, many others continued to expect elevated uncertainty to weigh down activity."

On the labour market, "Employment levels were [viewed as] largely stable in recent weeks", though in "most" districts, more employers "reported lowering head counts through layoffs and attrition, with contacts citing weaker demand, elevated economic uncertainty, and, in some cases, increased investment in artificial intelligence technologies".

Regarding inflation: contacts observed the impact of tariffs on input costs alongside a rise in services like “insurance, health care, and technology solutions”; that said, the degree to which these costs were passed onto consumers differed by district and product sold. The latest threat from President Trump of a further 100% tariff on Chinese goods from 1 November and the introduction of additional US port fees for China-linked ships (and we might add China’s in kind retaliation against US-linked ships) highlights that tariff uncertainties are likely to linger for US inflation for an extended period – a reality the FOMC will need to factor in.

For China meanwhile, as the press headlines repeated US / China trade relations fact and rumour, data remained consistent with existing trends, consumer prices falling 0.3%yr and producer prices down 2.3%yr in September. In recent months, price momentum has struggled to pick up despite authorities’ “anti-involution” policies – aimed at curbing overproduction. This development not surprising; it will take time for the policies and associated rhetoric to impact the economy. At the consumer level, if inflation is to return sustainably to 2-3%yr, there is also need for fiscal support targeting household demand. Detail on the next wave of support and its likely timing should come next week as China’s next Five-Year plan to 2030 is released. Looking further ahead, key themes and forecasts for China, the rest of Asia, Europe and the US can be found in our October Market Outlook.

CADCHF: ⬇️ Sell

• CADCHF broke support level 0.5700
• Likely to fall to support level 0.5600

CADCHF currency pair recently broke below the pivotal support level 0.5700 (which has been reversing the pair from the middle of September).

The breakout of the support level 0.5700 accelerated the active downward impulse wave iii of the impulse of the intermediate impulse wave (3) from May.

Given the clear daily downtrend, CADCHF currency pair can be expected to fall to the next strong support level 0.5600 (target for the completion of the active impulse wave 3).