US FX WRAP: AUD outperforms on hawkish Hauser, as EUR lags

The Dollar Index was more or less flat as geopolitics dominated newsflow. The latest update is that the US State Department is preparing to order the departure of some personnel and family members from US embassies in Saudi Arabia. This comes amid renewed attacks on Saudi Aramco's Shaybah oilfield. Elsewhere, there was no tier-1 US data on Wednesday, as traders await a deluge of risk events next week. Earnings season remains in full flow, with Mag-7 reports from Meta and Tesla. ING writes that the dollar continues to trade with a soft undertone but no longer looks particularly stretched on short-term valuation metrics. ING added that the softer dollar backdrop has shifted the balance of risks somewhat further in a USD-bearish direction, but it still favours a gradual and orderly dollar decline rather than a sharper depreciation, as the broader Fed, oil and rates narrative remains supportive of the dollar. G10 FX performance was mixed vs. the Greenback, with the Antipodeans outperforming. The AUD sat atop the pile, buoyed by hawkish remarks from RBA Deputy Governor Hauser, who said monetary policy is working, but the inflation outlook has deteriorated and appears worse than forecast. CAD and GBP were little changed, with the latter digesting a slightly hotter-than-expected UK CPI print for September. This dataset, alongside the recent solid jobs report, should offer MPC members enough evidence that the UK economy is resilient enough to justify a hike in November. CHF, JPY and EUR all posted mild losses vs. the Buck, with the single currency the slight laggard as it continues to be weighed on by the French fiscal situation, which remains front of mind, as well as the ongoing protests. For the Yen, BoJ Deputy Governor Himino remarked overnight that upside inflation risks remain high, warning that delays in adjusting monetary policy could allow those risks to materialise and harm the economy. In addition, Kyodo reported that the BoJ is expected to assess at its October 29th-30th meeting whether underlying inflation has reached 2%, while holding rates at 1.25%. As a reminder, reports yesterday said the BoJ is likely to hold in October but could signal a December hike, and may slightly raise its FY27 inflation forecast.