Tuesday October 10th, 2023

The USD is hedges lower, oil prices and equity markets are up, while US yields rise. Currency market remains volatile, crude continues its move upward as the market digests the recent development in the Middle East. After an unprecedented attack by Hamas, Israel formally declares war on Hamas and launched military strikes, imposed a ‘total blockade’ on the Gaza strip and called up 300,000 reservists to execute their military operation. Biden will be providing additional assistance to Israel defense force with more to follow in the coming days. While important economic figures are to be released this week, the Middle East situation will remain the key focus for market participants for the upcoming days. ?

In other news.??

Three General Motors Canadian plants are going on strike after negotiations failed to produce results. While some progress had been made, Unifor’s president said that sadly it wasn’t enough. The two parties remain at the bargaining table. IMF’s chief economist says global economy is ‘limping along’ cutting China and Euro area’s growth forecast and the US.?

In currency news. Euro climbs to two-week highs past 1.0600 as it gathers fresh steam against the USD. ECB’s Lagarde speaks later today at the IMF/World Bank’s meetings. Investors believe that the ECB will halt their rate rise campaign and that the Fed will hold off raising rates in the coming months. China to unveil plans of extra stimulus to support growth. Speculations of a USD/JPY intervention remain strong. Israel's shekel hit its weakest level since early 2016.?

CNY?and Asian currencies are flat on average vs. USD. Trading currencies are mixed with JPY weakening 0.20%, AUD and NZD slipped 0.1%, CHF strengthen 0.2% SEK (0.4%) while?NOK is off 0.55%. MXN loses ground (0.12%) while the ZAR is rallying over 1% vs. USD.?

In commodity news.?Since the close on Friday, oil has rallied more than 4%, Natural gas up 1.8%, gold is up 1.25%, Copper prices are flat, Wheat is down 1% while Soybean remains stable. ?

CAD has benefited from the surge in oil prices related to the Middle East conflict. Comments from Dallas Fed president (hinted at a reduced need to raise rates) and Fed Vice-Chair Jefferson (emphasizing the importance of proceeding cautiously with additional rate hike) have also helped the Loonie. US to release PPI and FOMC minutes tomorrow. ?

EURCAD bounced back after yesterday’s sell-off and is consolidating in the mid 1.4300’s.?

EUR hedges higher ahead of Lagarde’s speech. ECB’S Villeroy commented that at this stage further rate increase are not the right thing to do. On the economic docket, Germany’s consumer price index will be released tomorrow.?

GBPEUR retraces from near two-week high, has it falls below 1.1600.?

GBP stabilizes after recovering from a six-month low. BoE’s Mann called for a more aggressive stand in bringing down inflation towards 2%. UK manufacturing and constructions have been facing the greatest headwind related to high inflation. ?