- Slow start to week due to holidays in Asia and Germany
- Risk sentiment improves, mildly
- US opens mixed, but still above Friday’s opening levels.
USDCAD snapshot: open 1.3771-75, overnight range 1.3733-1.3826, close 1.3831, WTI $82.92, Gold $1661.55
The Canadian dollar is trading close to its overnight session peak as S&P 500 futures claw out some gains.
Equity traders are happy to see the back of September. The S&P 500 lost 17.71% while the Dow Jones Industrial Average fell 16.32%, largely due to the steep rise in the 10-year Treasury yield which cracked above 4.0%. Equities have found a short-term bottom, coinciding with the 10-year Treasury yield retreating to 3.718% in NY this morning.
Asia markets were extra quiet due to holidays in Australia, South Korea, and the start of the week-long China Golden Week celebration.
Japan was open and the Nikkei climbed 1.07%
European bourses squeezed out modest gains with the French CAC index posting a 0.66% increase. S&P 500 futures are also in positive territory, gaining 0.36%, while oil prices surged higher, and gold remained close to unchanged.
West Texas Intermediate (WTI) jumped 4.20% following reports that Opec will announce a 1 million barrel/day production cut at Wednesday’s meeting. The move is mostly symbolic, as the cartel has not been able to achieve its existing production quotas. The gains may not be sustained as China’s economy continues to struggle.
The British pound was the most entertaining (and volatile) currency overnight. UK Prime Minister Liz Truss and Chancellor Kwasi Kwarteng looked rather foolish after they cancelled the proposed tax cut announced last week. Mr Kwarteng claims the surge in gilt volatility which nearly bankrupted some pension companies did not have anything to do with the policy reversal. If true, pundits suggest the move was a desperate effort to save his job.
GBPUSD rallied from 1.1088 to 1.1281 in anticipation of the news, then dropped to 1.1165 on its confirmation. Prices have since climbed to 1.1210 as risk sentiment improves and Wall Street equities futures rise.
EURUSD traded in a 0.9754-0.9834 band with prices weighed down by ongoing geopolitical tensions stemming from the Russian invasion of Ukraine and Putin’s threat to use nuclear weapons. The euro area’s manufacturing sector fell deeper into contraction territory during September dropping to 48.4 from 48.5 in August.
USDJPY rallied to 145.31 from 144.51 despite the slide in US 10-year Treasury yields. Prices have since retreated to 144.90 on broad US dollar weakness vs G-10 currencies.
AUDUSD climbed from 0.6404 to 0.6459. Prices are supported by expectations of a 0.50% RBA rate hike tomorrow.
US ISM Manufacturing PMI is expected at 52.2 compared to 52.8 in August.
