The Morning Update

Monday November 13th, 2023

Written by:
Paul Harrison

The USD is steady, oil prices inch higher, equity markets are up, and US yields are mixed as markets await key inflation data. Currency markets are sidelined ahead of Tuesday's key US inflation report which could confirm that interest rates may have peaked. The US CPI on Tuesday is forecast to show inflation y/y dropped to 3.3% in October, down from 3.7% in September. Equity markets gained after Taiwan semiconductor manufacturing posted its first monthly sales gain since February, increasing optimism that the global chip market is recovering. Oil prices are opening slightly higher, but investors anticipate oil prices could extend their three weeks of declines on continuing demand worries. Bitcoin retests 37,000, which is near its highest price in 18 months. In focus this week, Monday sees a light economic docket, Tuesday sees the US CPI and jobless claims, Wednesday China Retail Sales, UK CPI, and US Retail Sales. Thursday China's new home prices, US initial Jobless claims, and Friday sees US housing starts & ECB Lagarde speech.

In other news. Former UK PM Cameron was made foreign minister after Braverman was sacked. Iceland declares state of emergency as it braces for volcanic eruption. in Israel, Netanyahu ruled out the return of the Palestinian Authority in Gaza. Japan's wholesale inflation slows sharply as cost pressures wane. Moody's on Friday lowered its outlook on US credit rating to "Negative" from "Stable" citing large fiscal deficits and a decline in debt affordability. German homebuilding collapse threatens wider economic damage-FT. Geopolitical risks worst in 50 years, warns Baker Hughes CEO Lorenzo Simonelli.

In currency markets. Japanese Yen drops to a fresh 1-year low vs USD. Chinese Yuan tests a 1-week low ahead of Biden-Xi summit on Wednesday. The UK Pound firms slightly after PM Sunak cabinet reshuffle. CNY slips 0.1%, while Asian currencies are flat on average vs USD. Trading currencies are mixed with MXN, NOK, NZD, & JPY are down 0.15%, while CHF & ZAR are flat, and AUD & SEK firmed by 0.15% vs USD.

In commodity markets. Oil prices edge up by 0.2%, Natural Gas rallied by 5.3%, Gold prices firmed by 0.3%, Silver prices dropped by 0.5%, Copper prices strengthened by 1.2%, Wheat prices fell by 0.9%, and Soybean prices gained by 0.5%.

CAD is steady to start the week with investors preferring to sit on the sidelines ahead of Tuesday's key US inflation report. We anticipate the loonie will hold within a relatively tight trading range today with the absence of any fresh economic data releases and steady commodity prices. This week sees a lack of any high-tier CAD economic releases so we anticipate the US data releases will drive the Canadian dollar direction this week.

EURCAD edges back towards 3-month lows as weaker oil prices keep the CAD on the back foot.

EUR steadies below 1.0700 amid cautious markets ahead of Tuesday's key US inflation report. The USD holds steady in early trading as currency markets take a defensive stance, despite higher US Treasury bond yields. Investors appear comfortable sitting on the sidelines ahead of the Eurozone GDP and US inflation data due later in the week. Focus will also be on the Xi-Biden summit on Wednesday with markets looking for a thawing of the Sino-US tensions. Intraday with the lack of any key data releases we anticipate the Euro will maintain its 1.0670 - 1.0720 range.

GBPEUR edges higher in early trading after UK PM reshuffles his cabinet

GBP retests 1.2250 after the UK reshuffle and the focus shifts to UK employment & inflation data this week. The pound continues to leverage Friday's UK economic growth data which showed the UK economy avoided recession in Q3. The pound gained in early trading after PM Sunak sacked his interior minister Braverman and replaced her with former PM Cameron. Investors await the UK employment and inflation data for further guidance on Tuesday and Wednesday on the UK economic performance. Intraday we anticipate the pound will be capped at 1.2300 ahead of US inflation data on Tuesday.