Daily Currency Update

USD - US Dollar

The U.S. dollar didn't capitalize on the positive Non-Farm Payroll (NFP) report from last Friday for several reasons. First, the increase in jobs was limited in its scope. Furthermore, the data showed decelerating wage growth, and the household survey suggested softer job growth. As a result, this didn't intensify immediate concerns about the Federal Reserve implementing tighter monetary policies. This led to a decrease in the USD as U.S. interest rates dropped. Another crucial point is the market positioning. The USD concluded the previous week with a minor dip, breaking its eleven-week streak of gains. Had the general sentiment been more favorable towards the USD, investors might have overlooked these concerns. However, the currency's decline, even with seemingly positive headline data, indicates potential underlying issues with its price movement. Currently, the Dollar Index (DXY) has seen a drop for six consecutive days, and the overall upward trend of the USD seems to be shifting downwards. Remarks from Federal Reserve officials are further pressuring the USD. Both Fed Vice Chair Jefferson and Dallas Fed President Logan have expressed views aligning with SF Fed President Daly from last week. They believe that the rising long-term U.S. interest rates might reduce the need for more stringent policies by the Federal Reserve. Several members of the Federal Open Market Committee (FOMC) are scheduled to speak today. Additionally, Fed Chairman Greenspan will address the Economic Club of NY on October 19th. 

CAD - Canadian Dollar

Last Friday, Canada's employment statistics showed a surge in job growth, primarily from part-time roles, a decline in unemployment, and an uptick in wages, surpassing expectations. However, a slight decrease in working hours somewhat tempered the optimism for a growth boost towards the year's end. The primary concern for policymakers is the risk of inflation, especially given indications of persistent inflationary tendencies. Current market sentiments lean slightly towards the possibility of the Bank of Canada (BoC) raising rates again before the year concludes. Key data points that could shape market views on potential policy adjustments include the BoC’s Business Outlook Survey for Q3 on October 16th and the Consumer Price Index (CPI) data on October 17th. Given the weakening stance of the U.S. dollar and a revived risk appetite, the Canadian dollar (CAD) has the potential to climb closer to its estimated fair value, which stood at 1.3558 earlier today. Observe USD/CAD trends here.

EUR - Euro

The EUR/USD momentarily surpassed the 1.06 mark reaching its highest point in roughly two weeks. A weakening U.S. dollar is benefiting the Euro, and anticipations of economic stimulus from China provide a slight boost to the currency. In a television interview, ECB Governor Holzmann underscored the possibility of a more stringent policy adjustment should unexpected inflationary events occur.

GBP - British Pound

Sterling is moderately firmer on the day and extending its rebound from last week’s low. UK/US yield spreads have narrowed somewhat, reflecting lower US 10Y yields, over the long weekend. Firmer stocks add somewhat to the GBP tailwinds this morning, absent any other major factors.