The Morning Update

The USD is flat, oil prices are firm, equity markets are up, and US yields rise ahead of the US key jobs report. Currency markets consolidate, Brent crude attempts a rebound after suffering its biggest weekly loss since March, and equity markets gain on the prospect of weaker jobs data will ease pressure on the Fed to hike. The US jobs growth is anticipated to have slowed moderately in September, while the unemployment rate is expected to slip from 18-month highs, underscoring the US economic strength amid increasing headwinds in Q4/23. Nonfarm payrolls are forecast to have increased by 170k jobs, vs 187k in August, while the unemployment rate is forecast to fall to 3.7% vs 3.8% in August, the highest level since Feb 2022. "Friday's payrolls data, and next week's inflation number, will decide whether the 10-year Treasury yield goes up to 5% or down to 4.5%, said K.Broux a strategist at Soc Gen in London. A higher-than-expected jobs number may trigger "another wave of dollar-buying and bond-selling," he said. Today alongside US Jobs data, CAD Unemployment rate, and Fed Waller Speech will help drive intraday currency market direction.

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In other news. LNG workers in Australia vote to resume strikes at Chevron sites. Exxon in advanced talks for $60 bln acquisition of Pioneer. Tesla cuts US prices of Model 3, and Model Y cars. Philips shares fall nearly 10% after FDA criticizes product recall. Tensions simmer at European summits over migration, as the UK and Italy call for tougher action across Europe on irregular migration. Interest rate surge drives US car loan payments to a record high. The IMF chief says the global economy has shown resilience in the face of COVID-19, war, and high rates.

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In currency news. The Euro is set for its longest-losing streak in its history, with 12 consecutive weeks of declines heading into the US NFP report. Commodity currencies remain under pressure on the prospect of slower global growth and increasing bond yield volatility. The USD Index holds steady heading into the US NFP which could be the Fed's cue to hike or hold interest rates. CNY firms 0.1%, while Asian currencies are flat on average vs. USD. Trading currencies are mixed with JPY weakening 0.35%, AUD slipping 0.1%, while CHF & NOK are flat, NZD & SEK are p 0.1%, MXN firms 0.25%, and ZAR rallying 0.8% vs. USD.

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In commodity news. Oil prices are up 0.2%, Natural Gas prices strengthen 0.8%, Gold prices firm 0.35%, Copper prices rally 1.5%, Wheat prices fall 0.6% and Soybean prices gain 0.3%.

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CAD holds steadies vs. USD heading into the US & CAD key jobs report this morning. CAD rebounded from its 6-month lows on Thursday as bond yields steadied and domestic data showed Canada's trade balance surprised markets as it swung into a surplus in August. Today's focus will be on the CAD unemployment rate which is expected to have increased to 5.6 vs 5.5% in August and the net Change in Employment which is also expected to have eased to 20k vs 39.9k in September. A print outside of expectations for either the US or CAD employment data can potentially increase the volatility for the loonie today.

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EURCAD continues to edge higher, up nearly 1% in October as weaker oil prices continue to keep pressure on the loonie.

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EUR edges through 1.0550 as the US continues to consolidate heading into the US NFP report. Euro continues to oscillate within a 1.0460/1.0560 range, but is still on track for its 12th consecutive down week, its worst losing streak since its inception on January 1st, 1999. Investors are sidelined ahead of the key US jobs data which many expect could dictate if the Fed hikes or holds at its next meeting. San Francisco Fed President Mary Daly said the central bank may keep rates on hold if inflation and the jobs market cool. Our bias remains bearish Euro, any positive US jobs data will meet headwinds for Euro as it faces rising natural gas prices heading into the winter season and the increasing prospect of a Eurozone recession as growth continues to stall.

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GBPEUR holds steady as both currencies are sidelined ahead of the US NFP report.

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GBP continues to advance, breaking through 1.2200 vs. USD as the greenback consolidates ahead of the US employment report. The pound found support as the USD corrected following a decline in the US bond yields and as markets remain cautious heading into the jobs data today. Domestically Halifax house prices showed continuing weakness in the housing sector with prices falling 4.7% y/y, while UK construction activity plunged with surveys showing the residential sector suffered its biggest fall outside of the pandemic since 2009. The US jobs report will be the primary driver for markets today, we feel any strength in the pound will be capped towards 1.23, but any weakness could be exaggerated with the potential remaining for a test of 1.1800.