Daily Currency Update

USD - US Dollar

The USD has strengthened supported by higher US yields and a dip in global stocks, driven by a 2%+ drop in Chinese equities. While the dollar is vulnerable to weaker economic data and shifting Fed policy sentiment, it's unlikely to weaken as long as market caution prevails. Yesterday's Beige Book reported small changes in the US economy, describing the growth outlook as 'stable' or 'slightly weaker.' Given the lack of significant economic shifts, there's little reason to expect a return to interest rate hikes after skipping them in September, especially with long-term rates at their highest since 2007. More insights from Federal Reserve speakers are expected today, alongside key US economic data including jobless claims, the Philly Fed Survey for October, September's existing home sales, and leading indicators.

CAD - Canadian Dollar

The CAD dipped below 1.37 overnight in response to a sharp decline in Asian stocks. However, it has since recovered slightly from its earlier low as North American trading approaches. Compared to other commodity-linked currencies, the CAD is demonstrating relatively stronger resilience. Nevertheless, the CAD's performance is largely influenced by external factors, and its softer performance is currently justified by factors such as risk aversion, wider spreads, and weaker oil prices today. The estimated fair value for the CAD currently stands at 1.3675. Observe USD/CAD trends.

EUR - Euro

The EUR is showing a degree of strength in contrast to the overall upward movement of the USD this morning. Despite limited data available from the Eurozone, there isn't a clear catalyst for the EUR's relatively strong performance. French Business Confidence, for instance, decreased to 98 in October from the September reading of 100, which slightly fell short of consensus expectations. It's possible that investors are overly pessimistic about the economic prospects in the Eurozone. However, the slight gains in the EUR from its intraday low, just below 1.0530, might be attributed more to positioning considerations, as the long USD trade may be becoming somewhat overcrowded.

GBP - British Pound

Sterling's inclination to behave in a manner more akin to a risk-sensitive currency since the Brexit event is evident in today's performance, where it has shown weaker performance compared to the EUR, CHF, and JPY. There were no reports of UK economic data today. The Gfk Consumer Confidence report for October, which is expected to show a slight improvement from -21 to -20, is set to be released later this evening.