Daily Currency Update

USD - US Dollar

The US dollar's mixed reflecting investor caution amid multiple uncertainties. Despite positive data and higher yields, the US dollar's inability to gain ground suggests it may be in a late-stage market cycle. The resistance at around 107 in the US Dollar Index (DXY) is holding strong. Tensions in Gaza have risen following a hospital explosion, impacting regional dynamics during President Biden's visit. The Senate speaker issue continues with no resolution, raising the risk of a government shutdown. Equities are down, major bond markets are stable with a slight dip, and geopolitical concerns are boosting oil prices. Today's US data is limited to Housing Starts and Building Permits, but the Beige Book release at 14:00 ET and upcoming Fed speeches are closely monitored.

CAD - Canadian Dollar

The data mix couldn't have been more unfavorable for the CAD yesterday. The Canadian CPI figure fell short of expectations, while US data outperformed across the board. This caused a brief dip in the CAD, which quickly rebounded to the low 1.36s, where it stood before the data release and where it remains this morning. The September CPI results have diminished the likelihood of immediate tightening measures and have set a high bar for any future tightening actions. However, the potential for tighter policy still lingers due to elevated wage growth and inflation expectations in Canada. In the short term, expect a period of choppy range-bound trading as weaker risk sentiment and stronger crude oil prices offset each other. Observe USD/CAD trends.

EUR - Euro

The final Eurozone Consumer Price Index (CPI) for September has been officially confirmed at 0.3% month-on-month and 4.3% year-on-year. It appears that the underlying measures of inflation are slowing down rapidly, which is likely to reinforce the European Central Bank's (ECB) decision to keep its policy unchanged for the time being. Policymakers will probably wait until December's economic forecasts to gain a clearer perspective on the future, and declaring victory over inflation may not happen until at least Q1. The possibility of lower interest rates remains distant. The EUR/USD's decline from the upper 1.05s on the day indicates that there is still work to be done for a rally, but opportunistic buyers are expected to remain active during any declines.

GBP - British Pound

The UK Consumer Price Index (CPI) data came in slightly stronger than anticipated. On a monthly basis, headline prices increased by 0.5% in September, in line with consensus expectations. However, the annual inflation rate remained at 6.7%, contrary to expectations of a small decline. The core inflation measure decelerated less than predicted, registering at 6.1% year-on-year, and displayed some signs of short-term resilience. Input prices rose by 0.4% in the month, but factory gate prices declined by 0.1% on an annual basis. Pricing expectations for a Bank of England (BoE) rate hike in October have moderated slightly, while the odds of a rate increase before the year-end have remained largely unchanged at around 50/50. Sterling experienced a minor uptick in response to the data but has since returned to a relatively stable level.