The Morning Update

The USD softened as weak data boosted Fed cut expectations, while oil fell, equities dipped, and bond yields declined on risk-off sentiment. Most U.S. data releases face delays from the government shutdown, with key reports like CPI and state employment postponed, while import and export prices remain on schedule. The Fed has no major policy announcement this week, but officials continue signaling caution and readiness to cut rates if economic weakness persists. U.S. banks showed signs of stabilization with regional stocks rebounding, though concerns over credit quality and delayed economic data kept investors cautious. The IMF meeting, held in Marrakech over the weekend, emphasized that while global growth remains resilient, mounting debt, geopolitical fragmentation, and waning confidence in central banks pose significant risks to the global outlook. Over the weekend, U.S.-China trade tensions intensified as the U.S. threatened new tariffs, China imposed retaliatory port fees, and both sides signaled strategic shifts in trade policy, including the removal of China’s top WTO negotiator, keeping global markets cautious and uncertain. Bitcoin is rebounding as investor confidence improves, supported by easing U.S.-China trade tensions and the launch of BlackRock’s bitcoin-linked fund in the UK.

‍

In the news.  Over the weekend, U.S. “No Kings” protests drew millions nationwide with participants opposing Trump’s perceived authoritarian policies. Demonstrations were mostly peaceful with music, costumes, and symbolic displays, though some tensions occurred in Portland, and Trump dismissed the rallies as a “joke,” blaming radical left groups for funding them. An AWS outage disrupted major global websites and apps, including Fortnite, Snapchat, Coinbase, and Robinhood, causing connectivity issues while Amazon worked to restore services. President Trump threatened Colombia with aid cuts and export tariffs over alleged inaction on drug production, while U.S. forces struck a vessel linked to a Colombian rebel group carrying narcotics. The Russia-Ukraine war remains intense, with Ukraine conducting drone strikes on Russian energy infrastructure while Russia consolidates control over contested towns in Zaporizhzhia and Donetsk. Diplomatic efforts face hurdles, as Trump calls for a freeze along current lines, Putin demands full control of Donetsk for any deal, and civilian casualties and infrastructure damage continue to mount. The fragile Israel-Hamas ceasefire has been strained by mutual accusations of violations, with Israel conducting airstrikes in southern Gaza after an alleged Hamas attack. Hamas located the body of a deceased Israeli hostage but warned that continued Israeli military actions could hinder the return, while the Rafah border remains closed amid ongoing tensions.

‍

In currency markets. AUD and NZD strengthened on improved global risk sentiment, despite mixed domestic data showing higher unemployment in Australia and elevated inflation in New Zealand. The JPY weakened as political developments favored Sanae Takaichi, who supports fiscal and monetary stimulus, while the CNY, MYR, and THB held steady, supported by improving global risk sentiment and easing concerns over U.S. regional banks. The Indian rupee rose over 1% on the day and more than 5% over the past week, driven by RBI interventions and improving geopolitical factors. The MXN strengthened modestly amid stable oil prices and improving investor sentiment, while the ZAR edged higher supported by risk-on sentiment despite ongoing domestic political uncertainties. The PLN held steady as markets awaited economic data and commentary from the central bank, and the CZK showed slight gains, buoyed by resilient exports and stable regional economic conditions.

‍

In commodity markets. Gold inched higher as investors sought safe-haven assets amid global uncertainties, while silver rebounded from recent volatility, stabilizing as profit-taking eased and bullish momentum showed signs of resuming. Crude oil dipped on trade tensions and supply concerns, while natural gas, coffee, and wheat rose amid bullish sentiment and tight supply conditions. Copper edged lower despite strong long-term demand prospects, and soybeans gained on technical buying amid ongoing uncertainty in U.S.–China trade.

‍

USD/CAD edged lower despite the mixed economic data, including weaker wholesale trade and manufacturing sales, alongside mixed housing indicators. Falling Canadian bond yields and sensitivity to oil prices and trade developments kept investors cautious, while markets watch for potential Bank of Canada policy moves.

‍

EURCAD edged lower as weaker Canadian economic data and falling oil prices weighed on the Canadian dollar, while markets eyed a potential Bank of Canada rate cut on October 29th.

‍

EURUSD remained steady, as investors weighed improving global risk sentiment against the impact of France’s sovereign rating downgrade, while awaiting delayed U.S. inflation data for further insight into economic trends.

‍

GBPEUR held steady as weaker UK wage growth suggested labor market slack, while political stability in France supported the euro.

‍

GBPUSD edged higher as weaker UK wage growth weighed on the pound while renewed US banking sector concerns supported cautious investor sentiment.

‍