The Morning Update

Thursday November 9th, 2023

Written by:
Paul Harrison

The USD holds steady, oil prices rise, equity markets are up, and US yields rise as markets await the key central banker's speeches. Currency markets are quiet, oil prices bounce off 3-month lows, bitcoin hits 18-month highs, while equity markets continue to advance, and US yields rise after hitting their lowest levels in more than a month. Markets continue to focus on the tail end of company earnings season, with Walt Disney Co. gaining more than 4% after posting a profit beat. in focus today, Fed Chair Powell takes part in an IMF panel on monetary policy challenges, while ECB Lagarde, BoC Rogers, Fed Bostic & Barkin will also be speaking today. On the economic docket, the US initial Jobless Claims will help provide intraday direction to currency markets.

In other news. China's economy falls back into deflation in a blow to recovery. Russia's war economy leaves businesses starved of labor. The IMF raises China growth outlook as bankers urged to 'Ride the Dragon" - FT. Sony's net profits dropped 23% despite a boost for gaming and music units. Japan's BoJ governor warns unwinding ultra-loose policy is a serious challenge. SoftBank posts unexpected $6.2bn loss after WeWork bankruptcy. Apple dealt a blow at the top EU court over the Euro 14.3bn tax bill in Ireland. The US calls for the Palestinian Authority to run Gaza and West Bank after the war. UBS said it expects Brent Crude prices to move back towards $90-$100pb.

In currency markets. Currency markets are steady ahead of Fed Chair Powell's speech, with investors cautious that Euro & GBP's recent gains are vulnerable to possible hawkish Fed Chair comments. China's CNY eased 0.1% after weak inflation data, while Asian currencies weakened 0.2% on average vs USD. Trading currencies are mixed with ZAR tumbling 0.85%, JPY, CHF, NOK & MXN down 0.1%, while AUD is flat, SEK firms 0.1%, and NZD strengthening 0.35% vs. USD.

In commodity markets. Oil prices strengthened by 0.9%, Natural gas prices rose by 0.4%, Gold prices fell by 0.4%, Silver and Wheat prices tumbled by 1.1%, Copper prices slipped by 0.4%, and Soybean prices gained by 0.25%.

CAD halts its 3-day of losses as oil prices bounce off three-month lows and hawkish minutes from the BoC latest meeting helped provide some support for the loonie. Investors appear to be sitting on the sidelines ahead of a flurry of central bank speakers including BoC Rogers, with the key focus being on the Fed Chair's comments when he takes part in a panel on monetary policy challenges. We expect CAD to hold steady in early trading as markets absorb Fed & BoC speakers ahead of the Fed Chairs comments at 2 pm.

EURCAD drops in early trading as oil prices provide additional support to the loonie ahead of the Fed Chairs comments.

EUR slips below 1.0700 ahead of Lagarde and Powell's speeches today. The euro is struggling to make advances despite improving risk sentiment as investors focus on inflation and the possibility of the Fed Chair taking a more hawkish stance when he participates at the IMF panel today. ECB President Lagarde is anticipated to maintain her current rhetoric that EU interest rates will remain capped, while Fed Bostic & Barkin may press for a rate hike in December which could support the USD as 90% of economists anticipate the Fed may hold in December.

GBPEUR holds steady as markets await the Fed Chair and ECB Lagarde comments, while BoE Pill takes a status quo stance.

GBP slips below 1.2300 as markets await Fed Chair comments. BoE Chief Economist Pill said in a presentation to the Institute of Chartered Accountants of England & Wales today said "we do not need to raise rates to bear down on inflation". Pill went on to say that there is no sign yet of a decisive turn in domestically driver services price inflation. If the economic situation changes, we will need to change policy, BoE does not make promises on interest rates. Markets took Pill's comments that rates will hold, but not rise through Q4/23-Q1/24. Intraday Fed Chair comments will be the primary driver to markets today.