The USD firms, oil prices rally, equity markets are mixed, and US yields rise ahead of key US jobs report. Currency markets are muted as investors await the US Nonfarm Payroll report, with economists polled estimating 113k jobs were added in October, but the numbers could be impacted by the recent hurricanes. Asian equity markets were down after Apple reported softer demand in China. European equity markets are up but remain cautious ahead of next week's US election and the Fed policy meeting. The CBOE Volatility Index rose to its highest level in four months, heading into the US election on November 5th. Oil prices rallied amid increasing tensions in the Middle East. Elsewhere, Bitcoin weakened by nearly 1.5%, dropping below $70k, while Gold and Silver prices both strengthened in early trading. In focus today, the US Nonfarm Payroll report, the Average Hourly Earnings, and the US ISM Manufacturing PMI report will help provide intraday direction to currency markets.
In other news. Apple cautious on holiday outlook as it starts AI rollout. UK house price inflation slows almost to a standstill. Oil prices rise after Iranian commanders vow response to Israeli attack. Striking Boeing union endorses a 38% wage hike offer; vote set for Monday. The US Space Force warns of a 'mind-boggling' build-up of Chinese capabilities. Ukraine and US warn Kyiv's troops could face North Korean forces 'in days.' Mounties in BC raid the 'largest and most sophisticated' drug lab in Canadian history. Israel pounds Beirut's southern suburbs after US truces push. Asia's factory activity stagnates, taking the shine off a rebound in China.
In currency markets. The USD holds on to gains after the greenback posted its biggest monthly gains in just over two years in October. Currency markets are sidelined in early trading ahead of the key US NFP report today. CNY slips by 0.1%, while Asian currencies are weakened by 0.3% on average against the USD. Trading currencies come under pressure, with JPY, SEK, ZAR & CHF weakening by 0.5%, AUD falling 0.25%, NZD & NOK slipping by 0.1%, and outlier MXN strengthening by 0.2% against the USD.
In commodity markets. Oil prices rallied by 2.8%. Natural Gas Prices are flat. Gold, Silver, & Wheat are firmed by 0.5%. Copper prices gained by 0.9%, and Soybean prices strengthened by 1%.
CAD continues under pressure, seeing the loonie test a fresh two-year low yesterday at 1.3945 and suffering its biggest monthly decline in two years. The Canadian economy remains under pressure, with August's GDP stalling and increasing the prospect of another 50bps rate by the BoC in November. We continue to expect the CAD to remain under pressure ahead of next week's US Fed policy meeting and the US election day. Intraday, the US jobs data will be the primary driver for direction for the loonie.
EURCAD weakens as the euro retreats against the USD, while the loonie holds steady, supported by the rallying oil prices.
EUR dips towards 1.0850 as markets turn cautious ahead of the crucial US jobs data report. Euro holds within a tight trading range as investors remain on the sidelines heading into the US NFP report, which could help set the stage for next week's US Fed Reserve meeting. Markets are bracing for increasing market volatility heading into today's jobs data, increasing Mideast tensions, and next week's US election. Domestically, on Thursday, ECB Lagarde reiterated that the ECB expects eurozone inflation to sustainably reach a 2% target by 2025. We anticipate the Euro will be capped as the US economy continues to outperform the EU economy and expect increasing interest rate divergence between the ECB & Fed interest rates.
GBPEUR rebounds off October lows as investors return to the pound after the unpopular UK budget.
GBP stages a rebound, edging above 1.2900 heading into the US jobs report. The pound looks set for its worst weekly losses since 2018 amid political and monetary uncertainty. Labour's first budget unnerved the UK bond market and put pressure on the pound with its high-tax, high-spend and high-borrowing proposals. We anticipate the pound will be vulnerable to further volatility ahead of today's US Jobs data and next week's US election.
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