Daily Currency Update

USD - US Dollar

The US dollar is strengthening, although the 'market-weighted' DXY has dipped as we head into the North American session, staying within the October trading range. Risk appetite is muted due to Israel/Gaza developments, and President Biden's upcoming Israel visit is in focus. European stocks and US futures are stable to slightly lower, while bonds are weaker. Treasuries are underperforming, bolstering the US dollar. Crude oil prices are up slightly. There are concerns about soft data risks in the US due to rising interest rates, and the broader US dollar rally could face technical retracement after DXY's recent retreat from the 107 resistance point. Notably, Williams, Barkin, Bowman, and later, Kashkari, have speaking engagements today. More Fed officials are scheduled to speak in the coming days before the pre-FOMC blackout starting Saturday. Chairman Powell's speech at the Economic Club of New York on Thursday may emphasize the Fed's cautious approach. China is set to release GDP, Industrial Production, and Retail Sales data later tonight, closely watched by global markets.

CAD - Canadian Dollar

The CAD is trading slightly lower, in line with other high-beta currencies today, with limited losses expected before key data releases this morning. The Q3 Business Outlook Survey, released on Monday, indicated that the economy is feeling the impact of higher interest rates on activity and prospects. However, the survey also showed persistent inflation expectations, with a significant number of respondents anticipating inflation to remain above 3% in the coming years. Businesses still plan to raise prices more than usual, a concern highlighted by the central bank. This morning's CPI data is expected to confirm the presence of persistent inflation, with a forecasted 0.1% rise in September headline prices and a year-on-year rate of 4.0%. Core Median and Trimmed measures are also expected to ease slightly, at 3.8% and 4.0%, respectively, compared to August. If the data continues to suggest that inflation remains above the central bank's target range, it could increase expectations of further tightening before the end of the year. Swaps currently indicate around 17 basis points of tightening risk by year-end, which aligns with recent economic reports. Observe USD/CAD trends.

EUR - Euro

Germany's ZEW survey results for October exceeded expectations. The current assessment reading showed a slight softening, but it was less than anticipated, coming in at 79.9 (compared to 79.4 last month). Meanwhile, the expectations component improved to -1.1 (up from -11.4), also surpassing forecasts. These data indicate a notable improvement in sentiment as the ECB's interest rate cycle likely reaches its peak. This could foreshadow a somewhat stronger economic performance. The positive data helped boost the EUR, lifting it from session lows around 1.0535 to retest the earlier Asian high at 1.0560. Today, ECB officials Knott, Centeno, Guindos, Holzmann, and Nagel are scheduled to speak.

GBP - British Pound

The GBP is showing a modest underperformance today, following the release of UK jobs and wage data. Average earnings have declined to 8.1% year-on-year for the August quarter, down from 8.5% in July. Excluding bonuses, earnings have also decreased to 7.8%, albeit from an upwardly revised 7.9% in July. While this shift in the wage trend is seen as potentially reducing the likelihood of another Bank of England (BoE) interest rate hike before the year's end, it's important to note that wage growth still remains robust. Additionally, there is significant upcoming data, such as tomorrow's CPI release, which could influence the BoE's decision-making once again. Policymakers have emphasized that rate decisions are finely balanced.