US FX WRAP: Dollar hit by lower US yields; AUD hit on poor jobs report

USD weakness continued as AI concerns lingered, pressuring both tech stocks and US yields despite a hot PPI report prompting upward revisions to September PCE expectations. CHF, GBP and EUR all outperformed against the USD, while US tech-led equity weakness spread to Asian markets. The hotter-than-expected headline PPI reading was also driven by higher energy prices, while the core reading exceeded forecasts. Meanwhile, Retail Sales beat on the headline, albeit driven by sales at gasoline stations amid higher energy prices; claims were little changed W/W, and regional data was mixed (NY Fed beat, Philly missed). DXY now trades around 102.08, down from Wednesday's YTD high of 102.945.

GBP was one of today's better performers ahead of the October budget. The Guardian reported that the UK Chancellor is set to raise taxes on banks, potentially reversing previous cuts to the bank surcharge, which could raise more than GBP 2bln a year. UK GDP was better than expected in August, rising 0.1% (exp. -0.1%). At the BoE, Greene reiterated that she sees risks of second-round effects as “pretty significant”, whilst Breeden questioned whether the energy shock is gone or just delayed. The remarks highlighted a stark contrast between the two MPC members.

AUD sank after a weak jobs report, which saw employment unexpectedly fall by 39.3k (exp. +20k, prev. +39.5k). The headline was driven by a 73.7k decline in part-time employment, with the unemployment rate ticking higher to 4.7% from 4.6%, despite the participation rate falling to 66.8% from 67.1%. AUD/USD hit lows of 0.6894, a level last seen in July.