Daily Currency Update

USD - US Dollar

After experiencing a significant decline at the beginning of the week, the USD is now showing a strong recovery and is trading at higher levels compared to all major currencies in today's session. This resurgence in the USD appears to be driven by a decrease in risk appetite, despite the fact that European stocks and US equity futures have improved from their earlier session lows. The market sentiment is somewhat dampened by weak US tech earnings reported last night, but it seems that the USD's rebound may be exaggerating the overall market sentiment. Bond prices are generally down in today's session, with 10-year US Treasuries performing less favorably compared to European markets, while 2-year bonds are showing slightly better performance. Looking at index-weighted 2-year spreads, the DXY still appears to be relatively strong compared to its fair value. In economic news, the US is set to release the September New Home Sales report at 10 AM ET. Later in the afternoon at 4:35 PM ET, Federal Reserve Chairman Powell is scheduled to make brief remarks at a public policy event. It's important to note that this event falls within the Fed's blackout period, so it's unlikely that Chairman Powell will make any comments regarding monetary policy or the state of the economy.

CAD - Canadian Dollar

The CAD is displaying some weakness, approaching its earlier October high, although this decline is roughly in line with other major currencies on the same day. There isn't much anticipation surrounding the upcoming policy decision from the Bank of Canada. This is because the market has largely discounted the possibility of a rate hike after the drop in the September Consumer Price Index (CPI). Recent economic indicators, such as August Retail Sales and the Q3 Business Outlook Survey, have shown signs of softness in the economy. However, there are still areas of concern for the Bank, particularly the tight labor market and persistently high wage growth. Consequently, policymakers are not likely to ease their stance at this point. The policy statement will likely emphasize a willingness to implement further tightening measures if necessary. Forecasts in the Monetary Policy Report (MPR) may have a mixed outlook, with the possibility of growth downgrades while inflation may need to be adjusted upward. Recent shifts in market positioning against the CAD across speculative, leveraged, and real money accounts suggest that the CAD could react if the policy statement adopts a more hawkish tone than what the markets anticipate. Both the Governor and Senior Deputy Governor are scheduled to speak at 11 AM ET. Observe USD/CAD trends.

EUR - Euro

The latest IFO survey for Germany shows a slight uptick in business sentiment this month. The Business Climate reading increased to 86.9, surpassing consensus expectations, and the Expectations component also rose to 84.7, exceeding forecasts. These are the first improvements in these indicators since April. While these improvements are positive, the overall economic environment still exhibits a subdued tone. Following the release of the data, the Euro (EUR) briefly strengthened before retracing its gains.

GBP - British Pound

The trading performance of the British Pound (Sterling) is predominantly influenced by the broader fluctuations seen in G10 FX throughout the day. Despite the absence of any UK data releases this morning, the subdued performance of UK PMI and employment data earlier this week continues to exert downward pressure on overall GBP sentiment. The EURGBP currency pair advancing beyond the 0.87 level might indicate a transition to a new, elevated trading range between 0.87 and 0.89 for this currency pair.