The USD is steady, oil prices rally, equity markets are mixed, and US yields rise as Middle East tensions escalate. The safe-haven USD holds onto its biggest weekly gains in a week following the Iranian missile attack on Israel, as investors fret about the widening of conflict in the Middle East. Equity markets are mixed with markets adopting a wait-and-see strategy, while defense and energy companies lead market gains. Brent Crude topped $75 per barrel after Iran's missile attack on Israel, trading up over 2.5% as markets fear further escalation, possibly disrupting crude output within the region. Elsewhere, Bitcoin prices dropped 0.75%, falling below $61,500, while silver prices held steady and gold prices weakened, giving back Tuesday's gains. Alongside Middle East updates, markets will be focused on the US ADP Employment Change, ECB Elderson & Schnabel, and Fed's Hammack, Musalem, Bowman, & Barkin speeches to help provide intraday direction to currency markets today.
In other news. Israel strikes Beirut after Iran missile attack stokes fears of a wider war. The BoE warns of risks from hedge funds bets against US government bonds. Vance & Walz clash over the economy and Trump's 2020 electoral defeat. Russia takes the strategically important town of Vuhledar in eastern Ukraine. European carmakers brace for a deeper and longer downturn. Carney warns net zero will mean 'significant' stranded property assets. Top shale boss says the US 'unusually vulnerable' to the Middle East oil shock. Taiwan shuts down for Typhoon Krathon bringing torrential rain. Canada to hit Chinese Steel and Aluminum with tariffs.
In currency markets. Safe-haven USD extends gains, CAD outperforms its G10 peers as oil prices jump, while other currencies remain cautious on increasing Middle East tensions. CNY & Asian currencies slip 0.1% on average against the USD. Trading currencies are mixed, with JPY weakening 0.45%, ZAR slipping 0.1%, CHF & SEK flat, AUD, MXN & NZD up 0.15%, and NOK rallying 0.55% against the USD.
In commodity markets. Oil prices rallied by 2.8%. Natural Gas and Wheat prices strengthened by 1.2%. Gold prices weakened by 0.6%. Silver prices slipped by 0.1%. Copper and Soybean prices firmed by 0.4%.
CAD starts the day steady, holding on to Tuesday's gains when it rallied from a 1-week low of 1.3540 to breach 1.35 and outperformed its G10 peers as oil prices rallied over 5% following Iran's missile attack on Israel. Domestically, on Tuesday, CAD Manufacturing PMI turned positive, with factory activity rising for the first time in 17 months. Investors will continue to monitor the oil price, which will be a primary driver for the loonie in the short term.
EURCAD slipped to a fresh four-week low, down 1% in October as rallying oil prices on Mideast tensions support the loonie.
EUR finds some short-term support ahead of 1.1050 amid increasing caution amongst investors. The euro is under pressure on multiple fronts, with falling inflation levels increasing the prospect of the ECB cutting rates in October, the prospect of European beings stalled with the port strike in the US, and increasing geopolitical concerns, which have increased risk-off sentiment amongst investors. Intraday, investors will be focused on the US ADP jobs data, which will help set the stage for Friday's critical US Nonfarm jobs data.
GBPEUR holds steady, with both currencies sidelined as investors favor the safe-haven USD and global petro currencies.
GBP weakened through 1.3300 as risk sentiment waned and investors shifted to the USD. The pound remains on the back foot, with investors becoming increasingly risk-averse due to the rising geopolitical tensions in the Middle East, with investors favoring the safe-haven USD. Investors will be monitoring the ongoing Mideast tensions after Iran fired over 150 ballistic missiles at Israel and Israel deployed additional troops to Lebanon. Due to the lack of UK economic data releases, investors will be monitoring US jobs data and the Fed's speech to help provide intraday direction to the pound.
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