The Morning Update

The U.S. dollar firmed while oil prices eased, equities traded mixed, and Treasury yields edged higher as investors digested the latest economic data showing steady growth and persistent inflation pressures. In his speech yesterday, Fed Governor Christopher Waller, a Trump appointee, signaled support for a 25-basis-point rate cut, citing labor market weakness and contained inflation, while cautioning against moving too aggressively. The markets are closely awaiting September U.S. retail sales, durable goods orders, and personal spending data for signs of economic momentum, alongside a key speech by Fed Governor Stephen Miran, which could provide insights into the Fed’s policy outlook. U.S. China trade tensions persisted as the U.S. warned it would respond to China’s industrial and export measures, U.S. business groups pushed to ease export restrictions, and China accused the U.S. of WTO violations, while Asian markets rose on optimism about a potential fair-trade deal. To offset China’s dominance, Trump’s support for Australia’s rare earth minerals includes $3 billion in funding, a price floor, and offtake agreements, boosting Western miners, though experts caution the market shift will take time.

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In the news. AWS outage in the US-EAST-1 region was resolved early yesterday morning, highlighting the risks of reliance on a single cloud provider. Latin America is increasingly concerned as U.S.-Colombia tensions escalated following a military incident that allegedly killed a Colombian fisherman, prompting Trump to call Colombia’s president a “drug lord,” cut foreign aid, and threaten tariffs. Former French President Nicolas Sarkozy began serving a five-year prison sentence for criminal conspiracy related to allegedly securing illegal Libyan campaign funds, while maintaining his innocence and filing an appeal. Russia-Ukraine war intensified with heavy fighting in Avdiivka, Ukrainian drone strikes on Russian regions, and power outages in northern Ukraine, while diplomatic efforts continue as Trump’s proposed ceasefire gains backing from European leaders but faces Kremlin rejection. the Israel-Hamas conflict continues with ongoing ceasefire violations, Israeli strikes in central Gaza, and unresolved hostage issues, while U.S. Vice President Vance and international mediators work to stabilize the truce amid concerns Israel may abandon the agreement.

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In currency markets. Japan elected Sanae Takaichi as its first female prime minister, prompting a Nikkei rally to a record high and a weaker yen, as markets anticipate pro-growth policies and potential fiscal stimulus under her leadership. AUD is supported by improved U.S.-Australia relations, while NZD rises on September quarter inflation data meeting the RBNZ target, though U.S. uncertainties limit gains. In the Asian currencies, CNY was supported by stabilizing economic data despite a cautious PBoC stance, MYR strengthened on positive trade and inflation figures with a neutral central bank policy, while THB weakened due to a dovish Bank of Thailand and soft export data. MXN faces pressure from persistent inflation despite Banxico rate cuts, ZAR strengthens ahead of key economic data and potential FATF improvements, PLN is influenced by NBP easing and a widening current account deficit, while CZK remains under pressure from inflation despite a steady CNB policy.

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In commodity markets. Over the past month, gold has risen about 13.9% and silver about 15.4%, driven by Fed rate cut expectations, a weaker dollar, industrial demand, and safe-haven flows, though both have seen slight recent pullbacks. Crude oil dropped about 0.9% amid rising global inventories and weakening consumption due to slowing economic activity, while natural gas fell roughly 1.2% as demand growth cooled and U.S. supply struggled to meet requirements. Copper slipped around 0.8%, pressured by slowing industrial demand and concerns over China’s economic growth, reflecting broader risk-off sentiment in commodity markets. Soybeans rose on optimism over U.S.-China trade talks, wheat remained mostly stable after recent declines, and coffee gained modestly amid supply concerns and supportive global demand. It’s important to note that since the U.S. increased tariffs on Chinese imports, U.S. soybean prices have fallen about 23%, driven by halted Chinese purchases and a sharp drop in exports, putting significant pressure on American farmers.

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USD/CAD The Canadian dollar weakened to a six-month low against the U.S. dollar due to falling oil prices, recession concerns, and expectations of a Bank of Canada rate cut. Meanwhile, the U.S. dollar strengthened on improving U.S.-China relations, as investors await Canada’s September CPI data for further guidance.

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EURCAD is pressured by expectations of Canada’s September CPI, while the euro remains influenced by upcoming Eurozone economic data and ECB policy signals.

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EURUSD is under pressure as weak Eurozone economic sentiment and a cautious ECB outlook weigh on the euro, while expectations of a Fed rate cut support the U.S. dollar.

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GBPEUR is shaped by persistent high inflation and relatively strong economic growth in the UK, which support the pound, while the euro is pressured by moderate Eurozone growth, rising fiscal costs, and government debt concerns, creating a mixed outlook for the currency pair.

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GBPUSD is influenced by persistent UK inflation and upcoming fiscal measures, while the U.S. dollar faces pressure from expected Fed rate cuts and banking sector concerns, leaving the pair with a cautiously bullish outlook.

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