The USD eases, oil prices tumble, equity markets & US yields are mixed on easing Mideast tension and Fed outlook. The USD eases off eight-week highs but finds support as investors lower their expectations to a 25 bps rate cut in November following September's slightly higher inflation results. Equity markets and US futures edged lower following the selloff in crude oil prices, dragged down the energy sector after concerns eased about Israel attacking Iranian energy facilities. Brent Crude weakened below nearly 5% after the Washington Post reported that Israel doesn't plan to strike Iranian oil or nuclear plants. In addition, the International Energy Agency projected a supply glut in 2025. Elsewhere, China may raise $850 bln in new debt over three years to spur growth. Bitcoin eased 0.5% to $65.6k, while gold & silver prices held steady. In focus today, the CAD consumer price index, the US NY Empire State manufacturing index, and the Fed's Daly & Krgler speeches will help provide intraday direction to the currency markets.
In other news. Oil falls further as fears of Middle East escalation recede. EU ministers nod to support for nuclear energy ahead of UN climate summit. 7-Eleven's turnaround plan requires heavy lifting to stop Couche-Tard's $47 bln takeover. North Korea blows up inter-Korean road & rail lines near the border. Canada expels top India diplomats, links them to murder of Sikh leader. Israel kills at least 40 in Gaza; tanks deepen raid in the north. Cooling jobs markets keep the Bank of England rate cut on track. Nvidia notches record closes, could unseat Apple as the most valuable company. Boeing prepares layoff notices for thousands of workers as turmoil deepens. UnitedHealth beats quarterly profit estimates.
In currency markets. The pound weakens on weak jobs data, the USD slips from two-month highs, and the CNY tests one-month lows. Petro currencies come under pressure on the back of tumbling crude prices. CNY weakens by 0.35%, while Asian currencies are flat on average against the USD. Trading currencies are mixed, with MXN weakened by 0.45%, AUD & NOK eased by 0.2%, NZD & ZAR slipped 0.1%, CHF firmed by 0.2%, SEK gaining by 0.4%, and JPY strengthened by 0.55% against the USD.
In commodity markets. Oil prices tumbled 5.3%. Natural Gas & Copper prices weakened by 1.5%. Gold & Silver prices are up 0.15%. Wheat and Soybean prices eased by 0.7%.
CAD continues under selling pressure, tumbling 2.2% month to date in October, taking the loonie above 1.3800 as oil prices tumble in early trading. Oil prices tumbled following a WSJ article stating that Israel will not strike Iran's oil or nuclear targets. Investors will be focused on today's CAD Consumer Price Index, which is expected to ease to 1.8% y/y September, down from 2% in August. We anticipate the loonie will remain under pressure with weakening oil prices and expectations the BoC will cut at least 25 bps at its October 23rd meeting.
EURCAD edges higher to a fresh October high as weakening oil prices put additional pressure on the loonie.
EUR holds stead above 1.0900, supported by upbeat Eurozone sentiment. German & Eurozone Survey - Economic Sentiment both beat expectations in October and helped to support the Euro amid a softer USD. In other European data releases, Spanish inflation levels held steady at 1.5%, while French inflation levels eased slightly from 1.5% in August to 1.4% in September. Intraday markets will be focused on the NY Empire State manufacturing index and Fed speakers will help provide intraday direction to the Euro.
GBPEUR recoups lost ground in October, trading back at 1.2000 as markets expect the ECB to cut 25 bps at its Thursday's monetary meeting.
GBP rebounds from one-month lows after UK jobs data. The pound retests 1.3100 following the release of the UK unemployment rate, which eased from 4.1% to 4% in the three months from August. The employment change rose to 373k in the three months to August, vs. 265K the previous quarter. Markets are currently expecting the boE to keep rates on hold in October and expect a 25 bps rate cut in the November policy meeting. Intraday, the mid-tier US data releases aren't expected to significantly impact the pound.
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