Daily Currency Update

USD - US Dollar

Market sentiment is leaning strongly toward risk aversion this morning. Global stocks are down as investors reduce exposure due to concerns about the Israel/Hamas conflict escalation. Crude oil prices have risen slightly, and major bond markets show mixed performance, with US Treasury yields easing from yesterday. The US dollar has mixed results, while the Canadian dollar performs relatively well. The ongoing US House speaker saga has also affected sentiment. House Republicans blocked a proposed interim solution, leading to another expected vote for Jordan today. Federal Reserve Chairman's comments from yesterday echoed a cautious approach, noting the potential for further tightening amid signs of economic strength and slowing inflation. We anticipate the last of this week's Federal Reserve speakers before the November 1 FOMC decision and the subsequent blackout period.

CAD - Canadian Dollar

The CAD is in an unusual position today, showing strength against the USD despite generally weaker commodity FX trading. This relative strength could be attributed to firmer crude oil prices partially offsetting the impact of weaker stock markets. However, it's worth noting that the CAD is still hovering around 1.37 against the USD. The factors influencing the CAD have improved slightly, nudging its fair value estimate down to 1.3624 this morning. Projections suggest a 0.1% decline in Canadian Retail Sales for August, slightly better than the 0.3% drop estimated alongside July's data. In broad terms, the CAD appears relatively undervalued within its recent trading range against the USD but concerns about the risk environment are likely to keep it on the defensive in the short term. Observe USD/CAD trends.

EUR - Euro

Despite the upward pressure on US yields and the overall strength of the USD this week, the EUR has displayed notable resilience. It continues to maintain its relatively strong position this morning, with slight narrowing in Bund spreads (although there is some concern about widening spreads due to Italy's fiscal policy). There are no economic reports released from Europe today, and part of the EUR's strength could be attributed to positioning adjustments, as investors reduce their USD exposure.

GBP - British Pound

Sterling is displaying some weakness but has managed to recover slightly from its earlier session low. In September, UK Retail Sales declined by 0.9%, which was worse than the expected -0.4%. Additionally, the Gfk consumer confidence data released last night revealed a steeper-than-anticipated drop to -30 in October, down from -21 in September. The combination of high-interest rates is exerting pressure on consumer sentiment and activity, reflecting the broader economic softening.