[MARKET ANALYSIS] Antipodeans diverge as AUD saw strong CPI and NZD slumped on a surprise RBNZ hold, DXY awaits the Fed

• DXY is relatively flat this morning in a narrow 102.31-102.49 range (vs yesterday’s 101.99-102.40 range) ahead of the FOMC policy announcement (at 18:00 GMT) and press conference later today. The Fed is widely expected to hold rates at 3.75-4.00% in October despite hotter-than-expected inflation, as softer jobs data and dovish-leaning commentary from key officials support a pause, although a 25bps hike is widely anticipated in December and some policymakers may dissent in favour of immediate tightening (full Newsquawk preview available in the Research Suite). Analysts at ING also suggest that the key threat in recent weeks has been the AI woes, although earnings from large names in the space are watering down those fears, with SK Hynix reporting strong numbers overnight.
• EUR is flat and GBP slightly subdued, with the latter looking ahead to the UK Autumn Budget. On the latter, the Budget is expected to be relatively uneventful, with Chancellor Healey likely to maintain fiscal headroom of around GBP 15bln (prev. GBP 23.6bln), potentially raise the bank surcharge and announce additional energy and defence spending, while higher gilt issuance and persistent fiscal concerns pose downside risks to UK assets, although a further reduction in long-end issuance could cushion the market reaction (full Newsquawk Primer available). For the EUR, Dutch TTF prices remain near EUR 100/MWh as the ECB tomorrow is widely expected to hold rates at 2.50% and maintain its data-dependent, meeting-by-meeting approach, as French fiscal and political uncertainty alongside tighter financial conditions support a pause, despite elevated energy prices and hotter-than-expected inflation, with markets still pricing further tightening by year-end. EUR/USD resides in a narrow 1.1113-1.1132 range after finding some support not far from its 200 WMA (1.1106). GBP/USD trades in a 1.3272-1.3312 range with the next downside level being the Friday 16th low at 1.3262.
• JPY is among the better performers after taking a breather overnight after briefly reclaiming the 158.00 handle before turning lower, with participants eyeing the BoJ on Friday. USD/JPY remains below its 200 DMA (158.52) and largely within yesterday’s 157.42-157.97 range in a current 157.65-158.04 range.
• NZD slumped overnight as the RBNZ unexpectedly held the Official Cash Rate at 2.75% (exp. 25bps hike to 3.00%) via a 4-3 split decision citing global uncertainty, although Governor Breman reiterated that tighter policy will likely be required depending on the economy. AUD outperforms after Australian inflation accelerated more than expected in September, with CPI up 1.3% Q/Q (exp. 1.3%; prev. 0.6%) and 4.3% Y/Y in September (exp. 4.2%; prev. 4.0%), while the RBA’s trimmed mean gauge rose 3.7% Y/Y (exp. 3.6%; prev. 3.6%), raising expectations of a fifth rate hike at its 3rd November meeting. Meanwhile, CAD looks ahead to the BoC announcement later today (at 13:45 GMT), where the central bank is expected to hike rates by 25bps, with money markets pricing an 84% chance of an increase, as elevated energy prices, rising inflation expectations and hawkish commentary from Governor Macklem support tightening, despite weakening employment and headline CPI undershooting forecasts.

Antipodean divergence of this kind is a recurring pattern: the two currencies share the same commodity-bloc beta but decouple sharply when the RBA and RBNZ find themselves at different points of the cycle, and the AUD/NZD cross is where that policy differential gets expressed most directly. Split decisions at a central bank that pauses against consensus have historically been read as a delay rather than a terminus when the accompanying language keeps tightening conditional, which is the framing here; the follow-on tell is whether subsequent domestic data validate the majority or the minority. On the other side, an upside surprise in a trimmed mean measure has tended to carry more weight with inflation-targeting central banks than headline prints, and markets typically re-price the near-term meeting odds accordingly rather than the terminal rate. Into a widely anticipated Fed hold, the established pattern is that the dollar trades on the guidance and press conference tone rather than the decision itself, with any dissent skew doing the signalling work. The calendar compression, BoC and Fed same day, ECB and BoJ following, is the kind of clustering that historically suppresses pre-event ranges and concentrates volatility in the aftermath.