Following the volatility seen in the markets yesterday, there appears to be a greater sense of stability today. Global stocks are generally on an upward trajectory, and futures for US equities are showing positive signs. Most major bond markets are continuing to build on the gains they made yesterday, although US Treasuries remain relatively unchanged. The performance of the US dollar is somewhat mixed against other major currencies, but it has rebounded slightly from its early session lows, partly due to a weakening of European FX following softer economic data. The US dollar seems to be experiencing some uncertainty, and the broader rally it has enjoyed since the middle of the year appears to be showing signs of a slight correction, especially in the wake of yesterday's drop in US yields. The data scheduled for release this morning could further weigh on the USD in the short term. While Q3 GDP data, expected on Thursday, is anticipated to be strong, there are concerns that the October PMIs may indicate a slight softening, raising worries about the pace of economic slowdown in the US as we head into Q4.
Among the major currencies, the CAD has been the most stable, maintaining a relatively steady position against the US Dollar, just below 1.37. While equity markets are offering a bit more support for higher-risk foreign exchange (FX) currencies today, there has also been a slight uptick in crude oil prices. The CAD is currently keeping a close watch on the upcoming Bank of Canada (BoC) policy decision scheduled for tomorrow, and as a result, we can expect limited intraday price movements. Observe USD/CAD trends.
The EUR reached a peak of 1.0694 earlier, but its ascent was hindered by disappointing preliminary October PMI data. French Manufacturing showed signs of weakness, although Services and Composite data performed better. In Germany, Manufacturing outperformed September's figures and exceeded forecasts, but the Services and Composite data fell short of expectations. Across the Eurozone, data for October exhibited a general weakening compared to September and failed to meet forecasted expectations. There is no indication of the usual seasonal data improvement relative to expectations; instead, the PMI readings hint at a subdued outlook for the fourth quarter.
The GBP has experienced a slight downward drift in response to underwhelming economic data from the UK. Preliminary October PMI data in the UK showed some mixed results, with Manufacturing performing slightly better than expected (45.2, up from 44.3), Services activity remaining relatively stable (49.2, compared to 49.3 in September and as forecast), and a mildly improved Composite reading (48.6, versus 48.5 in September and as forecast). In a shift, the UK employment data has taken an 'experimental' approach, with the Office for National Statistics (ONS) releasing an adjusted unemployment rate due to declining response rates and accuracy concerns in the usual labor market survey. The new data for June to August revealed an uptick in the unemployment rate to 4.2%, up from 4.0% in March to May, reflecting an overall softening trend in the labor market.
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