The Morning Update

The USD is steady, oil prices are firm, equity markets are up, and US yields rise on improving risk sentiment. Currency markets are steady as investors await the ECB interest rate decision & the US Retail Sales report. Equity markets extended gains on easing inflation levels in the eurozone and UK, and the recovery in the tech sector eased nerves with results from Taiwan Semiconductor Manufacturing spurred gains across major stock indexes. TSMC posted a better-than-projected 54% rise in quarterly earnings, helping the stock gain +7%. The ECB policy decision is due this morning, and the central bank is expected to cut another 25 bps, taking rates to 3.25%. Elsewhere, oil prices steadied after four days of declines as markets balance out Mideast and China growth concerns. Bitcoin retreated by 0.8%, Iron ore tumbled to a 3-week low, and Gold prices climbed to fresh highs of nearly $2,700. Markets will be focused on the ECB Monetary Policy Statement, US Initial Jobless Claims, US Retail Sales, and BoE Monetary Policy Report Hearing to provide intraday direction to currency markets.

‍

In other news. The UN warns it will run out of food for northern Gaza in a week and a half. TSMC bullish on outlook as AI boom blows Q3 profit past forecasts. The ECB is set for a second straight rate cut as the eurozone economy ails. China boosts funds for housing projects to support the embattled sector. Nestle misses sales forecasts to streamline the organization. Iran warns Israel against retaliation for missile attack. Japan's exports fall for the first time in 10 months due to China & US slowdown. Boeing hones $15 billion financing plan to weather crisis. TD economist predicts 'sizeable' bump in housing market activity this quarter. Expedia surges on Uber takeover reports.

‍

In currency markets. Currency markets are mixed with the USD, GBP & EUR steady. At the same time, AUD strengthens on domestic jobs strength, and Asian currencies come under pressure as investors favor the USD as markets turn cautious ahead of the US election. CNY & Asian currencies slip 0.1% on average against the USD. Trading currency markets are mixed, with ZAR tumbling 0.7%, MXN weakening 0.4%, SEK & NOK slipping 0.2%, JPY flat, NZD & CHF firmed by 0.15%, and AUD strengthening 0.4% against the USD.

‍

In commodity markets. Oil prices strengthened by 0.35%. Natural Gas & wheat prices slipped by 0.3%. Gold prices are up by 0.15%. Silver prices are down by 0.6%, Copper prices tumbled by 1.4%, and Soybean prices weakened by 0.85%.

‍

CAD eases in early trading as the prospect of a 50 bps rate cut by the Bank of Canada next week keeps an underlying pressure on the loonie. Markets have increased the prospect of a 50 bps rate cut to 80% following Tuesday's CPI report, which showed cooler-than-expected domestic inflation levels. We expect investors also to remain cautious ahead of the US elections, with the prospect of a Trump win could see an increase in tariffs and impact the USMCA trade agreement. Intraday, the focus will be on the US Retail Sales to help provide direction.

‍

EURCAD turns positive, with investors expecting an increased divergence in interest rates with the prospect of a 50 bps rate cut by the BoC next week.

‍

EUR sits at a near 10-week low ahead of the ECB rate decision today. The euro continues to be under pressure as the single currency struggles against a weakening domestic economy, increasing adverse risk sentiment, and the anticipation of increasing interest rate divergence between the US. Investors are widely expecting the ECB to cut interest rates for a 2nd time by 25 bps, which is not expected to impact market volatility. Investors will be paying close attention to the ECB President Lagarde's comments in the post-meeting press conference in the afternoon.

‍

GBPEUR edges higher, but overall, investors remain sidelined ahead of the ECB President's comments and the BoE Monetary Policy Report Hearings.

‍

GBP steadies at 1.3000 ahead of a busy day of BoE, ECB announcements, and the US Retail Sales report. The pound struggles to edge above 1.3000 as risk sentiment improves and the USD steadies ahead of the key US Retail Sales data today. In the short term, the pound's strength appears to be capped following Wednesday's softer-than-forecasted inflation report, increasing the prospect of 50 bps rate cuts by the BoE in Q4. Intraday, the US Retail Sales, and the BoE Monetary Policy Report Hearings will help provide direction for the pound.