Energy relief lifts the euro; US data still have the final say on the dollar.
The euro and Swiss franc lead into the US session as hopes of progress in Iran talks push energy prices lower. US equity futures have recovered some of Friday’s losses, but the rebound is uneven: AUD and JPY have struggled, while sterling has held a daily gain. Investors are welcoming cheaper energy without buying every currency exposed to growth.
Oil fell around 4% during the morning as talks between Iranian and Qatari officials raised hopes that supply disruptions could ease. Reports that Washington favours giving diplomacy more time helped, but conditions for reopening Hormuz remain disputed. Cheaper oil prices do not establish that shipping routes have reopened.
For Europe, lower oil and gas prices offer relief from an expensive import bill. The euro has gained despite France’s negative credit-rating outlook and mixed domestic data. The euro-area manufacturing PMI was revised up to 52.7, though it remained below September’s 52.9; German retail sales fell 2%, while French and Italian manufacturing remained below 50. Kažimír’s warning that markets may underestimate further ECB tightening adds another potential support. The bearish weekly EUR starting bias needs reassessment against that combination before it becomes a trade.
The franc’s strength also deserves attention. It has held up alongside improving equities and cheaper energy, so calling the session simply “risk-off” misses the split within FX. Swiss manufacturing beat expectations, while retail sales disappointed. Tuesday’s CPI is the next test of the domestic policy backdrop. The yen has not attracted the same sustained demand despite the energy relief.
CAD faces the other side of the oil move: cheaper energy eases global inflation pressure but can reduce Canadian export income. Trade discussions with Washington provide a possible offset, not a completed agreement. AUD remains under pressure before Tuesday’s RBA decision, with weak Chinese official PMIs and Friday’s technology sell-off complicating the domestic inflation story. A widely expected hike needs to be judged alongside guidance on what follows.
For USD, the immediate question is whether US data reinforce or challenge the morning’s weakness. European bonds have outperformed Treasuries in the supplied morning reports; that does not establish a fresh collapse in US short-term rate expectations. The final S&P manufacturing PMI is due at 14:45 UTC, followed by ISM and construction spending at 15:00. Read orders, hiring and prices together: strong demand with persistent costs would tell a different policy story from cooling prices alongside weaker activity.
Tuesday’s midterms add uncertainty over fiscal policy, trade and Iran. A particular election result is not automatically bearish or bullish for USD. Apple’s results after the close provide another test of technology sentiment, with financing concerns still unresolved after Friday’s sell-off.
What changes this read?
Renewed escalation and rising energy prices would challenge Europe’s relief and could restore support to CAD. Strong US activity and price details that lift relative US yields would challenge the weaker-dollar view. EUR and CHF failing to hold gains on supportive news would also deserve reassessment.