The USD steadies, oil prices strengthen, equity markets are up, and US yields rise with a focus on rates. Currency markets are steady, with the euro holding near four-week lows ahead of the ECB interest rate decision today. Equity markets strengthened, led by the tech sector, as risk sentiment improved. Investors will monitor the European Central Bank interest rate decision, with markets widely expecting a 25 bps rate cut. Still, the tone of the ECB statement will guide the euro's direction in Q4. On Wednesday, the resilient US inflation levels and the labor market data reinforced a measured course of action for the Fed, with markets ditching the prospect of a 50-bps cut and fully pricing in a 25-bps point cut next week. Elsewhere, oil prices jump over 1% on fears of the impact of the hurricane on the Gulf Coast. Bitcoin strengthened by 1%, gold held steady, and copper prices rallied by nearly 2%. In focus today, the ECB rate cut and statement, US initial jobless claims, and producer price index will help provide intraday direction to currency markets.
In other news, Brussels is exploring Draghi's option of extending up to Euro 350 billion in EU debt. Spain vetoed the Hungarian bid for Talgo gauge Technology over Ukraine concerns. Tesco lost a UK legal battle over the 'fire and rehire' of staff. The IEA cuts 2024 oil demand growth forecasts due to the slowdown in China's economy. The US supports two permanent UN Security Council seats for Africa. Hawkish BoJ policymaker calls for rates to rise to at least 1%. China detains investment bankers and takes passports in a corruption sweep. Couche-Tard discusses a higher price for 7-Eleven owners. Brookfield takes political heat over Carney's ties with Trudeau. Moderna will cut $1.1 billion in costs and launch ten new products by 2027, as it charts the post-COVID path.
In currency markets. The USD, GBP, and EUR are sidelined as markets focus on the ECB interest rate decision, followed by the US Jobless Claims and PPI report. CNY holds steady, while Asian currencies slip by 0.15% on average against the USD. Trading currencies are mixed, with ZAR weakening by 0.65%, JPY & CHF down 0.2%, AUD, SEK & NZD flat, and MXN & NOK gaining 0.25% against the USD.
In commodity markets. Oil & Copper prices rallied by 1.8%, natural gas prices weakened by 1%. Gold prices are up 0.2%, silver prices are strengthened by 0.7%, wheat prices are flat, and soybean prices are gained by 0.5%.
CAD remains unchanged despite improved risk sentiment and rallying commodity prices. Wednesday's stronger US inflation levels parred expectations of a Fed rate cut to 25 bps next week. The loonie is down nearly 2% in September against the USD as Canada's third-quarter growth is expected to be much slower than the BoC forecast. DiCapua, a senior economist at Canada's Chamber of Commerce, said in the third quarter ending Sept 30th, Canada will probably record GDP growth of around 1% to 1.5% on an annualized basis, adding it looked more likely that the BoC would be making deeper cuts. Intraday, US PPI, & Jobs data will help drive direction for the loonie today.
EURCAD holds steady ahead of the ECB interest rate decision, and a less dovish stance is expected to put further selling pressure on the loonie with increasing expectations of increasing interest rate divergence between the BoC & ECB in Q4.
EUR holds above 1.1000 ahead of today's ECB policy announcement. Markets are widely expecting the ECB to cut by 25 bps to 3.5%, but investors will monitor the statement for signals of further interest rate cuts in 2024. ECB policymakers are expected to note that eurozone inflation has fallen while the rebound in the eurozone economies is stuttering, but persistent price pressures continue to be a concern. ECB officials appear united for a 25 bps cut in September, but appear divided on further cuts in 2024.
GBPEUR remains steady, with the cross flat for September, as investors are looking beyond today's rate cut to the ECB monetary statement for signals of further ECB rate cuts in 2024.
GBP holds on to Wednesday's gains, testing 1.3050 heading into the US data releases. For the month to date, the pound has remained down 0.5% against the USD as UK growth concerns are causing investors concern. We expect the pound to stall within its current trading ranges as investors await next week's UK inflation report ahead of Thursday's 19th BoE interest rate decision. Intraday, the US PPI will be the primary driver for the pound today.
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