The Morning Update

The USD remains weak, oil prices are off, equity markets are rising while the US yields hedge higher. After 14 months of stable interest rates, the Fed is expected to lower rates later today. While the size of the cut remains uncertain, many believe that this is the start of an easing cycle. Perhaps the policy statement and press conference will give a clearer picture.

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In other news. Hours after Israel officials said stopping Hezbollah attacks on the north of the country to allow the safe return of displaced residents was an official war goal, pagers used by Hezbollah to communicate exploded across Lebanon. Ukrainian drones strike a large military depot in a Russian town northwest of Moscow. North Korea launches ballistic missiles for second time in a week. A Chinese aircraft carrier entered Japan's contiguous waters for the first time on Wednesday, the latest in a string of military manoeuvres that has ratcheted up tensions between the neighbours.

In currency markets. The JPY continue it move higher (+0.53%) ahead of the Fed’s announcement. Since July, the JPY gained 12% against the USD as the BoJ has been hiking rates and the Fed is about to enter an easing cycle. The USD lost ground against the CNY (0.12%), MYR (0.28%). The AUD and NZD have rallied against the USD 0.44% and 0.65% respectively. The trading currencies are a little stronger this morning with the ZAR up 0.1% and the MXN 0.03%.

In commodity markets. Oil prices are off 1.4% ahead of the Fed’s rate decision as industry report showed increasing U.S. crude and fuel inventories, offsetting rising tension in the Middle East and the potentially bullish impact of a U.S. interest rate cut. Gold remains unchanged and copper lost 0.1% as the investors remain cautious. Wheat claws back some ground even as Black Sea supply pressures prices while soybean rose 1.2%

Current level USD Index                           100.741              Down 0.15%

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The USD/CAD pair attracted fresh sellers during the Asian session and currently trades below the 1.3600 mark, down less than 0.10% for the day. Weakness in oil prices could limit the C$ from strengthening.

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Current level USDCAD                              1.3584                 Down 0.10%

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The EURCAD is taking a pause from it’s recent run up but remains near it’s July highs.

Current level EURCAD                               1.5126                 Up 0.11%

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The EUR remains strong against the USD as traders seem more confident that the Fed will ease by 50bps - this as ECB officials seem split over the interest rate-cut path due to diverging opinions over the inflation outlook

Current level EURUSD                               1.1136                 Up 0.19%

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The GBPEUR pair rose in early trading on the back of the release of the UK inflation figures. All eyes are on the HICP inflation.

Current level GBPEUR               1.1875 (.8418)                   Up 0.30%    

The GBP moved higher after the announcement of the UK inflation figures.

Current level GBPUSD                               1.3223                 Up 0.46%

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