The Morning Update

The USD edges higher, oil prices extend losses, equity markets are mixed, and US yields rise as risk sentiment stalls ahead of the Fed Chair speech. The USD held on to Tuesday's strong gains as investors revert to the safe-haven greenback. Equity markets come under pressure as disappointing tech earnings compound ongoing high-interest rate concerns. Bitcoin soars to near 18-month high as a US EFT speculation mounts. The 10-year treasury yield strengthened, helping to provide additional support to the USD. Oil prices continue under pressure as economic concerns offset Middle East supply worries. In focus today is The Bank of Canada's interest rate decision, ECB President Lagarde, and Fed Chair Powell's Speeches.

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In other news. Google to run internet cables to Pacific islands in an Australia-US deal. China's new bonds to help economic recovery, official says, as budget deficit rises. The BoE is likely to keep high rates on hold even as signs of slowdown mount and recession worries grow. US House Republicans to see if Mike Johnson can win the speaker's gavel. Thailand's LNG boom risks slowing SE Asia energy transition: Maguire. The US moves to deter Iran ahead of Israel's invasion of Gaza. Hong Kong slashes property stamp tax to revive struggling economy.

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In currency news. GBP weakens as soft data supports BoE keeping interest rates on hold. CAD hits 3-week lows ahead of the BoC interest rate decision. Trading currencies come under renewed selling pressure as investors favor the safe haven USD again. CNY slipped 0.1%, while Asian currencies fell by 0.2% on average vs USD. Trading currencies are under pressure with ZAR tumbling 0.65%, NOK weakening 0.5%, AUD, SEK, MXN & NZD down 0.4%, while CHF slipped 0.3% and JPY is flat vs USD.

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In commodity markets. Oil prices slip by 0.1%, Natural Gas prices gain by 0.5%, Gold weakens by 0.25%, Silver prices tumble by 1%, Copper prices fall 0.7%, Wheat prices strengthen 0.35% and Soybean prices are unchanged.

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CAD extends its weakness hitting near monthly lows and approaching 7-month lows vs USD on a combination of weaker commodity prices, increasing geopolitical concerns, and the prospect of BoC keeping interest rates unchanged. We anticipate that the BoC will keep interest rates on hold at 5% today, with the possibility that the BoC governor will hint that the bank has completed its hiking cycle. We maintain our bearish CAD view that the US will maintain the interest rate advantage over Canada, the US economy will continue to outperform a lagging CAD economy, and the prospect of recession across Europe will dampen commodity prices in Q4/Q1 24. The intraday focus will be on the BoC interest rate decision, as well as the Governor's comments, as well as the Fed Chair's comments later in the day.

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EURCAD edges higher in early trading as oil prices ease and as investors are sidelined heading into the BoC interest rate decision.

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EUR extends losses, dropping below 1.0600 as the markets turn cautious. Euro continues under pressure as investors shift back to the safe-haven USD as Middle-East concerns mount ahead of an anticipated ground offensive in Gaza. Domestically German IFO - Current Assessment Index improved to 89.2 in October up from 88.7 in September. The upbeat German IFO data helped to provide some underlying support to the Euro, but with increasing risk-off sentiment we anticipate the Euro is vulnerable to weaken beyond 1.0500 into November. Intraday markets will be focused on ECB President Lagarde's & Fed Chair Powell's speeches to provide direction to the single currency.

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GBPEUR weakened to test fresh 5-month lows, dropping nearly 2% in the last 3 months and looking vulnerable to further weakness on the back of the prospect of higher UK Interest rates for longer despite the growing fears of the UK entering recession in Q1/24.

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GBP is sliding towards 1.2100 vs. USD as risk sentiment sours. The pound is trapped in a downward spiral as high domestic interest rates are expected to remain into Q2/24, despite weakening domestic growth which is expected to take the UK economy into recession. At the same time, the ongoing strength in the US economy, the prospect of still higher US interest rates, and souring risk sentiment amid increasing geopolitical tensions increase investor's attraction to the safe-haven USD. Intraday Fed Chair Powell's speech will be the key focus for investors today. Our bias remains for further GBP weakness towards 1.1800 into November.