The Morning Update

The USD firms, oil prices strengthen, equity markets are mixed, and US yields rise after the US ahead of the Fed Chairs comments. Financial markets had a quiet start to October with China, India, and Hong Kong closed for domestic holidays. US equity futures advanced after US lawmakers reached a deal over the weekend to avoid a government shutdown. The USD firmed in early trading as US Treasury 10 and 30-year yields rose to their highest level since 2007. Investors start the month on a cautious note as they await comments from the Fed Chair Powell, who is due to speak at a roundtable discussion alongside Fed President Harker. Also in focus today, are US Manufacturing PMI, CAD Global Manufacturing PMI, and BoE's Mann speech will help provide intraday direction to currency markets.

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In other news. German manufacturing drops on weak demand and falling output. Top House Rep McCarthy vows to survive ouster threat for avoiding shutdown. The World Bank warns that Asia faces one of the worst economic outlooks in half a century. Turkey detains 20 people linked to Kurdish militants over Ankara bombing. The UAE proposes hosting a second-year UN climate summit as Russia blocks talks. Indonesia opens China-backed high-speed rail between Jakarta with the economic hub of Bandung.

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In currency markets. Japan intervenes in the JPY as the Yen advances to 150.00 vs. USD. Russian Rouble close to seven-week lows vs. USD. Euro, GBP, & commodity currencies slip in early trading as the USD rebounds. CNY firms 0.15%, while Asian currencies fall 0.4% on average vs. USD. Trading currencies are under pressure with ZAR tumbling 0.65%, AUD & SEK weakening 0.55%, NZD falling 0.4%, JPY down 0.25%, NOK slipping 0.1%, while outlier CHF firmed 0.25% vs. USD.

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In commodity markets. Oil prices strengthened 0.9%, Wheat rallies 1%, Gold and copper dropped 0.85%, Soybean wakens 0.6%, Natural Gas slipped 0.3%, and Silver tumbled 2.9%.

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CAD extends losses and tests its weakest levels since September 13th as it edges above 1.3600 as the USD advances. The loonie came under pressure on Friday after the GDP report supported the view that the Bank of Canada will not hike rates again in 2023. Strengthening oil prices are expected to provide some support to the CAD head of the US & CAD PMI data releases this morning. A break of 1.3639 opens up the potential for further CAD weakness to September highs of 1.3694.

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EURCAD holds steady in early trading after mixed Eurozone PMI data, with investors awaiting CAD PMI data today.

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EUR comes under renewed selling pressure after weak German PMI data. Investors were disappointed with the weaker-than-expected German PMI, despite Spain, France, and Italy posting better-than-expected manufacturing PMI. The euro is expected to remain on the back foot with ongoing hawkish Fed comments, while the ECB is expected to have completed its hiking requirements. Intraday US Manufacturing PMI and the Fed Chair Powell's comments will help drive the intraday direction for the Euro.

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GBPEUR is flat as investors are sidelined ahead of US data and Fed Chair Powell's speech.

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GBP tumbles in early trading amid a strengthening USD. The pound came under selling pressure, breaching 1.2200 and retesting 1.2150 in early trading as the USD strengthened heading into the US Fed Chair's comments. Domestically, Nationwide Housing Prices y/y were down -5.3, slightly better than expected, while the UK Manufacturing PMI came out as expected at 44.3. The focus will be on BoE Mann's speech where he is expected to be "dovish-leaning" suggesting that the BoE has completed its hiking cycle. A break of 1.2105 opens the pound up to further weakness towards 1.1800 next.