Sometimes the dollar is the key mover, but sometimes, like today, it seems to be the fulcrum, reflecting disparate moves among other currencies. While the euro is at two-month highs, the yen is near two-month lows. The euro is bouncing off two-month lows and the 100-day moving average against sterling. Most emerging market currencies are advancing against the dollar today. Of note, the Hong Kong dollar’s 0.4% rally is the largest in 15-year.

There are several developments today, and not all of them are reflected in the prices. For example, the flash PMI for the eurozone was softer than expected. The composite reading for September slipped to 54.2 from 54.5. Note that it averaged 54.3 for Q3 after 54.7 in Q2 and 57.0 in Q1. German and French manufacturing softened to 53.7 and 52.5 from 55.9 and 53.5 respectively. It may be a bit simplistic, but this is one of the places one would look for the impact of the trade tensions. Services, on the other hand, are more reflective of domestic demand. German services PMI rose to 56.5 from 55.0, while French services eased to 54.3 from 55.4.

The euro poked through $1.18 for the first time since the June ECB meeting. There is an option for about 740 mln euros that expires there today and another at $1.1775 for 890 mln euros. That June high was near $1.1850, which was a five-high. If today’s gains hold, it would be the eighth gain in the past 10. Not only does there appear to be an equity rotation taking place but the Italian premium over Germany (10-year) has narrowed about 60 bp this month we see several large banks taking a more optimistic look at Italian debt, encourage by official suggestions that next year’s deficit will be in the 1.6%-1.8% range. Talk of a parallel currency an existential confrontation with the EU has all but evaporated.

The US-China trade conflict escalated this week, but this may work to the advantage of other countries. Japan, Taiwan, and South Korea’s latest export figures have been strong.  Korea reported today that exports in the first 20 days of September jumped 21.5% year-over-year (imports rose 14%). Taiwan reported export orders rose 7.1% in August rather than 6.2% as the median forecast in the Bloomberg survey had it.  Earlier this week, Japan reported a 6.6% increase in exports from a year ago, which was also above expectations.