investingLive Americas FX news wrap 30 Oct: ECB keeps rates unchanged. Stocks tumble.

The ECB kept rates unchanged with the deposit rate remaining at 2.0% and the Refinance rate at 2.15%.Lagarde said the services sector continues to expand, driven notably by growth in digital services, while manufacturing remains constrained by tariffs. She noted an ongoing divergence between domestic strength and weak external demand, with household consumption expected to support growth despite unusually high savings rates.

The global environment remains a drag, though some downside risks have eased due to progress in trade negotiations and relative peace in the Middle East. However, Russia’s war in Ukraine continues to pose major uncertainty. She said manufacturing orders are stabilizing, and indicators of underlying inflation are consistent with the ECB’s target, supported by moderating labor costs and slower wage growth ahead. Long-term inflation expectations remain around 2%, but Lagarde cautioned that inflation risks are more uncertain than usual—a stronger euro could lower inflation faster, while higher defense spending could push it up in the medium term.

Lagarde reiterated that the ECB is not pre-committing to a particular rate path and will remain data-dependent in its policy approach.

During the Q&A Lagarde said, “We are in a good place,” adding that the ECB will do whatever is necessary to maintain stability. She expressed cautious optimism, saying growth could be stronger but is holding up reasonably well. She highlighted corporate investment in AI as a positive development and noted that its labor market impact will take time, creating both new jobs and displacing others. She also mentioned that supply chain bottleneck risks have not yet reemerged and confirmed there was unanimous support for the October policy decision.

The EURUSD moved to a low of 1.1546 which was just short of the double bottom low from October at 1.15413. The subsequent bounce took the pair into a swing area between 1.1576 to 1.15929 (1.1585), before rotating back to the downside to close near 1.1568. Sellers are more in control with the price below the swing area high at 1.1592.

Overall, the USD was higher vs the major currencies with the USDJPY the biggest mover at +0.90%. The gains in the USDJPY were aided by the Bank of Japan decision to keep rates unchanged. BOJ Ueda said that there is no pre-set about timing of the next rate hike which assuaged the markets fear for higher rates sooner rather than later. Ueda also said Japan’s economy is recovering moderately but still showing some weakness, with easy monetary policy expected to support growth. He noted that economic expansion will likely remain modest due to trade-related slowdowns and weaker overseas demand but should improve as global economies stabilize.

The meeting with Trump and XI were described by Trump as being a “12 out of 10”. It seems 155% tariffs have been avoided and total tariffs on imported goods will be more like $47% instead of 57% thanks to a 10% reduction in tariffs due to fentanyl. China is supposed to restart purchased of soybeans and sorghum, and other Farm products and agreed to continue the flow of Rare Earth, Critical Minerals, Magnets, etc., openly and freely. They have made promises before. We will see if the “framework” leads to consistent policy as opposed to the herky-jerky changes that have characterized the administration’s trade policy with China.

US stocks has not liked the Fed yesterday, the prospects out of Washington as the calendar changes to a new month with implications for government workers and other government funding welfare programs.

The Nasdaq and S&P closed at session lows with the Nasdaq falling -1.57% and the S&P down -1.0%. However, Apple and Amazon shares are each trading higher in after hours trading after better than expected earnings, giving fresh hope for tomorrow (Apple is up 5% while Amazon shares are up 13%.

This article was written by Greg Michalowski at investinglive.com.