The USD is steady, oil extended gains, equity markets, and US yields are mixed ahead of US jobs data. The USD steadies near six-week highs ahead of the crucial US Nonfarm payrolls report, which could guide the path of US interest rates in Q4. Equity markets continue to struggle to advance amid escalating hostilities in the Middle East, dampening global risk sentiment. Oil prices extend gains, up nearly 9%, and are set for their biggest weekly gain since early 2023 as investors weighed the prospect of a wider Middle East conflict. Alongside Middle East updates, investors will be focusing on the US Nonfarm Payrolls report, which is forecasted to hold at 140k, and the unemployment rate to remain steady at 4.2%. "Anything that will point to a stabilizing or re-acceleration of growth will force markets to reconsider the current aggressive pricing of interest rate cuts," said Tipp, Chief Investment Strategist at PGIM Fixed Income. In focus today, US Average Hourly Earnings, NFP report, Unemployment rate, CAD Ivey PMI, and Speeches from ECB Elderson, BoE Pill, and Fed Williams will help provide intraday direction to currency markets.
In other news. The EU says plans for Chinese EV tariffs obtained necessary support from member states. Air strikes shake Beirut as Israel targets Hizbollah's leadership. US port workers and operators reach a deal to suspend the strike until January 15th to allow time to negotiate. Taiwan re-opens mopping up after Typhoon Krathon. Seven & I considers selling down supermarket stake ahead of IPO, sources say. China's stimulus draws investors back to offshore bonds of the troubled property sector. Singapore charges property billionaire linked to jailed minister's case. Ukraine's top commander bolstered in the east after Vuhledar fell. The EU top court says some FIFA player transfer rules breach EU law.
In currency markets. The USD index steadies at six-week highs, CAD slips to a 10-day low, AUD is set for weekly gains against JPY & NZD, and Asian currencies remain under pressure heading into today's key US Jobs report. CNY & Asian currencies eased by 0.1% on average against the USD. Trading currencies are mixed with NZD down 0.2%, AUD, CHF, NOK & MXN flat, ZAR & SEK firming 0.2%, and JPY strengthening 0.3% against the USD.
In commodity markets. Oil prices rallied by 1%. Natural Gas prices eased by 0.3%. Gold prices are flat. Silver prices weakened by 0.5%. Copper prices firmed by 0.15%. Wheat prices tumbled by 1.2%, and Soybean prices firmed by 0.4%.
CAD remains under selling pressure as the strengthening USD continues to counter rallying oil prices, taking the loonie to a 10-day low against the USD. The USD is benefitting from its safe-haven status amid escalating Mideast tensions and strengthening jobs data, reducing the prospect of a 50 bps cut in Q4. Domestically, Canada's services economy weakened in September as employment levels fell and new businesses dropped to a four-year low. Alongside a flurry of US data, investors will be focusing on the CAD Ivey Purchasing Managers Index, which is expected to rise to 50.2 in September vs.48.2 in August.
EURCAD remains on the back foot with the loonie, falling nearly 1% in October as rallying oil prices provide underlying support to the loonie.
EUR continues under pressure amid adverse risk sentiment heading into the crucial US NFP report. Euro continues to look vulnerable to further weakness amid increasing Mideast tensions, softening EU inflation levels increasing the prospect of greater ECB easing, alongside the prospect of a less dovish Fed. Euro has weakened 1% in October, falling from 1.1200 to test 1.1000, which opens up the possibility of further weakness towards August lows of 1.0750. Intraday, the US Jobs data will be the primary driver for the single currency today.
GBPEUR rebounds in early trading, bouncing off monthly lows following less dovish comments from BoE Chief Economist Pill.
GBP edges off October lows, breaching 1.3150 after BoE Pill's comments. The pound finds some support after tumbling nearly 2% this week from the combination of adverse risk sentiment and dovish comments from BoE Governor Bailey. The pound managed to rebound when BoE Chief Economist Pill adopted a more cautious tone regarding further policy easing, saying, "Further cuts in the bank rate remain in prospect, but it will be important to guard against the risk of cutting rates either too far or too fast." Investors will be focused on the US jobs data to guide the pound today.
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