The Morning Update

The USD eases, oil prices weaken, equity markets rise, and US yields are mixed following the Fed and easing supply-disruption fears. The USD eased from a seven-week high after initially rallying on the Fed’s rate hike and hawkish guidance, with Chair Warsh signalling that further tightening remains possible. The dollar later gave back some gains as oil prices fell on easing Middle East supply concerns. Global equity markets were mostly higher, with U.S. stock futures and European shares advancing as falling oil prices eased some of the inflation concerns that had pressured markets earlier in the week. The Fed’s rate hike and signal of further tightening were largely absorbed, while a pullback in Treasury yields also helped support risk appetite, particularly in technology and economically sensitive shares. Elsewhere, oil prices extended losses as easing Middle East supply concerns reduced the risk premium. Gold slipped as the Fed’s hawkish stance kept yields elevated, while bitcoin firmed alongside improved risk sentiment and softer energy prices. In focus today, the UK BoE interest-rate decision, U.S. initial jobless claims, Philadelphia Fed Manufacturing Index, housing starts and building permits, followed by U.S. pending home sales.

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News Headlines. 'Hostile Act'; Trump threatens EU with tariffs over Canada associate-membership proposal. Putin braces for election stress test as Russians 'feel the pain' of struggling economy. Trump hopes Iran war nearing end as Houthi-Saudi fighting escalates. The UN mission finds grounds to believe the US committed war crimes in Iran, and Tehran committed crimes against humanity. Canada applies to join the UK-led military coalition. The EU asks China to voluntarily limit hybrid car exports. Sweden's left-wing opposition parties are predicted to win the election. The US passes a bill targeting importers of Russian oil.

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In currency markets. Against the USD, attention now shifts to the Bank of England later today, where rates are expected to remain unchanged but guidance on future tightening will be closely watched, and to the Bank of Japan on Friday, where markets expect another rate increase and signals on the pace of further normalization. JPY has strengthened back toward 155.50, while GBP and EUR have also edged higher as the post-Fed dollar rally loses some momentum.

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In commodity markets. WTI -0.30% | Nat Gas +0.03% | Gold -0.93% | Silver -0.83% | Copper +1.31% | Palladium -0.91% | Coffee -0.98% | Cocoa -0.77% | Soybeans +0.45% | Wheat -0.31%

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CAD is flat in early trading, holding near six-week lows after yesterday’s decline as the Fed’s rate hike and expectations for further U.S. tightening kept the dollar supported. Softer oil prices added to the pressure, although the Bank of Canada’s own hawkish bias and expectations that rates could also rise in coming months are providing some underlying support.

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EURCAD is steady in early trading, straddling 1.6050, with both currencies lacking a clear near-term catalyst. The euro remains capped by a cautious ECB outlook despite persistent inflation concerns, while CAD continues to draw support from expectations of further Bank of Canada tightening, even as softer oil prices limit momentum. With those factors broadly offsetting each other, EURCAD remains range-bound for now.

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EUR held broadly steady below 1.1500 after the Fed’s 25-basis-point rate hike and hawkish guidance kept the U.S. dollar supported. The ECB also raised rates last week and continues to signal concern over elevated inflation, but markets currently see the Fed as having more scope for further tightening, leaving the euro near recent seven-week lows.

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GBPEUR was little changed in early trading, with the cross holding near 1.1670 as markets awaited today’s Bank of England decision for a fresh catalyst. The euro continues to draw support from the ECB’s recent tightening move, while the pound has struggled to build momentum, leaving the pair largely range-bound ahead of the policy announcement.

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GBP was little changed near 1.3400 ahead of today’s Bank of England decision, with policymakers widely expected to leave rates unchanged despite August inflation rising to 3.1%. Markets still price a strong chance of further tightening before year-end, although Governor Bailey may push back against aggressive rate-hike expectations as underlying inflation pressures remain relatively contained. The policy statement and voting split will therefore be closely watched for clues on whether a November hike remains the most likely next step.

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