The Morning Update

The USD advances, oil prices rebound, equity markets fall, and US yields rise ahead of the FOMC minutes. The U.S. dollar edges higher, supported by rising oil prices and expectations that the Fed will continue tightening later this year despite fading odds of an October hike. Attention now turns to today’s FOMC Minutes and a series of Fed speakers for clearer guidance on the policy path, with markets still assigning a meaningful probability to a December rate increase. Global equity markets fall as renewed attacks on tankers in the Strait of Hormuz lift oil prices and revive concerns over inflation and interest rates. European and Asian stocks weaken while U.S. futures ease from record highs, with elevated bond yields and renewed geopolitical risk weighing on sentiment ahead of the FOMC Minutes and the start of earnings season. Elsewhere, oil prices rebound as a developing Gulf of Mexico storm and renewed attacks in the Middle East raise concerns over supply disruptions. Bitcoin and gold prices weaken as the firmer USD, rising yields and renewed inflation concerns weigh on non-yielding and speculative assets. Today the focus will primarily be on the FOMC minutes for future guidance on US rates.

‍

News Headlines. Treasury yields rise ahead of closely watched 10-year auction and FOMC minutes. IMF chief has stark warning for France over surging bond yields. Google ordered to halt work on two data centres in Finland. Vance says Iran must cut enrichment to end war. Police in France use tear gas and water cannons against student protesters. SpaceX in talks to borrow $40 billion to buy Nvidia chips. Iran ramps up ship attacks in Hormuz as oil and gas flows rise. Trump's tariffs give Carney cover to fast-track Canada building push. Microsoft and Nvidia CEO's to unveil new AI laptop at San Francisco event.

‍

In currency markets. Against the USD, JPY weakens despite more hawkish signals from the BoJ, with Sato supporting gradual rate increases and officials indicating underlying inflation may have reached the 2% target. The yen remains under pressure as the USD stays firm ahead of today’s FOMC Minutes and further Fed commentary, while markets continue to price in additional U.S. tightening later this year.

‍

In commodity markets. WTI +0.47% | Nat Gas +1.38% | Gold -0.98% | Silver -1.74% | Copper +0.20% | Palladium -2.97% | Coffee -0.82% | Cocoa +1.37% | Soybeans +0.19% | Wheat -0.46%

‍

CAD retreats in early trading, giving back part of yesterday’s rally despite Canada’s stronger-than-expected trade surplus and firmer oil prices. Markets await today’s FOMC minutes for further guidance on the Fed’s rate outlook, although softer US employment data have reduced expectations for an October hike. Domestic political uncertainty is also adding a modest headwind for the loonie, while attention will increasingly turn to Friday’s Canadian employment report for direction on the BoC outlook.

‍

EURCAD extends its sell-off in early trading, with the euro weakening as renewed political and fiscal concerns in France weigh on sentiment despite stronger-than-expected German industrial production. Rising French borrowing costs and uncertainty over the government’s ability to pass its 2027 budget are undermining confidence in the single currency, while firmer oil prices are providing additional support to CAD. The combination leaves EURCAD vulnerable to further near-term weakness.

‍

EUR weakens against the greenback in early trading, giving back Tuesday’s gains as rising oil prices and renewed US dollar strength outweigh stronger-than-expected German industrial production. Brent moving back above $100 is adding pressure on the energy-dependent Eurozone growth outlook, while lingering fiscal and political concerns in France remain an additional headwind. Attention now turns to today’s FOMC minutes, with markets looking for further guidance on the timing of the Fed’s next rate hike.

‍

GBPEUR pushes to a fresh 16-month high as ongoing French fiscal and political concerns continue to weigh heavily on the euro. Expectations that the Bank of England could resume tightening in November, while recent Eurozone bond-market volatility has reduced expectations for further ECB hikes, are providing additional support to the cross. However, elevated UK borrowing costs and uncertainty ahead of the October 28 budget could temper further GBP gains.

‍

GBP remains under pressure against the USD in early trading, with a broadly firmer greenback supported by elevated US Treasury yields and ongoing geopolitical uncertainty. Expectations for a Bank of England rate hike are helping to limit sterling losses, but near-term direction will hinge on today’s FOMC minutes and what they signal about the timing of the Fed’s next move.