The Morning Update

The USD holds steady, oil prices tumble, equity markets are up, and US yields are mixed as markets focus on rates & stimulus. The USD holds steady ahead of Fed Chair Powell's speech, while the CHF firms after the Swiss National Bank cut rates by 25 bps, less than the expected 50 bps. Equity markets rallied overnight after China announced $285 billion of sovereign debt this year to help revive its flagging economy. Among the steps, China is considering injecting up to $142 bln of capital into its biggest state banks, which would be the first time since 2008. Fed Chair Powell will give a pre-recorded address at the 10th annual US Treasury Market Conference with investors looking for US interest rate policy direction signals in Q4. Elsewhere, oil prices weaken on expectations of Saudi Arabia increasing production and signs that Libya has reached a deal to reopen its crude reduction. Bitcoin gained nearly 1% toward $64k, while gold firms towards 2,700 and silver prices rallied over 1.5%. In focus today, speeches from Fed Chair Powell and ECB President Lagarde, US Jobless Claims, Durable Goods, and the revised USD GDP will help provide direction to currency markets.

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In other news. Saudi Arabia is ready to abandon the $100 crude target to take back its market share. China lifts markets with the promise of more support for its economy. Netanyahu's far-right allies attack ceasefire proposal with Hizbollah. Putin revises nuclear doctrine in warning to the West. Belgium calls for EU ban on Russian gas as imports rise. Some 7-Eleven owners in Japan welcome foreign bids and hope for change. ECB doves to push for a rate cut in Oct, hawks to dig in. Shippers scramble for workarounds ahead of looming US East Coast port strike. Hurricane Helene barrels toward Florida with fierce winds and storm surge. Farmers worried about exports pushed Ottawa to intervene in the grain terminal strikes.

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In currency markets. Euro struggles to breach 1.1150 as ECB doves push for more rate cuts. Swiss National Bank cuts 25 bps, below expectations, helping the CHF firm, while the USD holds steady heading into Fed Chair Powell's recorded remarks later today. CNY firms by 0.2%, while Asian currencies strengthened by 0.3% on average against the USD. Trading currencies rebounded on China stimulus news, with NOK flat, JPY, ZAR & SEK up 0.1%, CHF & MXN gaining 0.3%, NZD firmed 0.4%, and AUD strengthened by 0.7% against the USD.

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In commodity markets. Oil prices tumbled by 1.65%. Natural Gas, Copper, and Silver prices rallied by + 1.5%. Gold prices firmed by 0.25%. Wheat & Soybean prices strengthened by 0.4%.

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CAD holds below its 6-month highs as investors balance tumbling oil prices against improving global risk sentiment. The Fed Chair's comments today are not expected to have a major impact on the USD today as his comments are recorded, and there will be no Q&A. With the absence of any CAD economic releases, Investors will be monitoring the US jobs data and a flurry of Fed speakers to provide intraday direction. We remain bearish on CAD into Q4 and see the current levels as an opportunity to buy USD with the possibility of a further 1% in CAD rate cuts in Q4.

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EURCAD holds steady in early trading, with the Euro remaining up by 0.7% in September with the prospect that both Central banks will cut rates in October.

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EUR stalls at 1.1150 ahead of Fed Powell & ECB Lagarde speeches. Euro finds a reprieve from the rebound in global risk sentiment following China's increased stimulus to include support for its state banks and helped rally global equity markets. In the bigger picture, the Euro is holding close to its 14-month high of 1.1215 as the ECB remains cautious about lowering interest rates. Markets are expecting the ECB Doves to succeed, with the ECB cutting a further 25 bps in October, which is expected to limit the Euro's ability to rally beyond current highs.

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GBPEUR extends gains, approaching 30-month highs on the expectation of monetary policy divergence between the BoE and the ECB in Q4.

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GBP breaks above 1.3350 amid improving risk sentiment and a softer USD. The pound rebounded as risk recovery picked up momentum due to China's additional stimulus measures. Domestically, the pound remains one of the strongest-performing currencies as the pound finds support as stickier-than-expected UK inflation has set expectations that the BoE will take a longer timeline to ease its monetary policy. Intraday Fed speakers and US Jobs data will help provide intraday direction for the pound.