The USD holds firm, oil prices rally, equity markets fall, and US yields rise as risk sentiment wanes. The US Dollar Index tests fresh 19-month highs, supported by elevated Treasury yields, resilient US economic growth and expectations for further Federal Reserve rate hikes. Mounting fiscal and political concerns in Europe, alongside rising energy prices and persistent geopolitical uncertainty, continue to favour further USD strength. Global equity markets weaken as a sharp rebound in oil prices fuels inflation concerns, pushes bond yields higher and reinforces expectations for further central bank tightening. US equity futures retreat from recent record highs, while European markets face additional pressure from French fiscal uncertainty and renewed selling in banking stocks, leaving investor sentiment cautious despite strong corporate earnings. Elsewhere, oil prices rally sharply as escalating tensions in the Middle East and renewed supply disruption concerns push Brent above $104 a barrel. Gold prices edge higher on safe-haven demand, while Bitcoin eases below $83,000 as rising bond yields and a stronger USD weigh on risk appetite. Today's focus will be on the ECB Monetary Policy Meetings Accounts, US Initial Jobless Claims ans comments from BoE & Fed speakers will help give intraday direction to currency markets.
News Headlines. The EU envoy lands in China in last ditch talks over car exports. French bond sell-off prompts 'bottom fishing' across Europe. Trump says he doesn't want Iran deal as US reportedly prepares for 'massive bombing'. PepsiCo earnings top estimates, but company lower full-year forecast. Billionaire donors overwhelmingly back Republicans in 2026 midterm elections. Oil jumps as Middle East supply concerns persist amid shipping attacks. Syria considers help in Yemen war after Saudi airports come under Houthi fire. South Korean banks were likely hacked by a Chinese-backed actor with an AI agent. Alberta and Saskatchewan premiers shut down Elon Musk's call for separation.
In currency markets. Against the USD, ZAR and MXN are both weaker as elevated oil prices, geopolitical uncertainty and softer global risk appetite weigh on emerging-market currencies. ZAR remains particularly sensitive to higher energy costs given South Africa’s reliance on petroleum imports, while MXN is also under pressure ahead of today’s Mexican inflation data and Banxico minutes, with markets reassessing the domestic rate outlook.
In commodity markets. WTI +4.72% | Nat Gas +1.81% | Gold +0.03% | Silver -2.11% | Copper Flat | Palladium +0.49% | Coffee -1.09% | Cocoa -0.72% | Soybeans -0.25% | Wheat +0.29%
CAD holds steady in early trading, finding some support from sharply higher oil prices as renewed Middle East supply concerns lift crude. Broader sentiment remains cautious, however, with elevated bond yields, recent risk-off flows and uncertainty surrounding the U.S.-Canada trade outlook continuing to limit the loonie’s upside. Markets are also pricing in at least one further BoC rate increase before year-end, helping to offset some of the external pressure. Attention now turns to Friday’s Canadian employment report, which will be closely watched for its implications for BoC rate expectations.
EURCAD remains under pressure, slipping below 1.5950 as renewed selling in French bonds keeps fiscal and political concerns firmly in focus and weighs on the single currency. France’s widening borrowing-cost premium over Germany and fears of broader euro-area contagion continue to undermine EUR sentiment, while higher oil prices are providing some support to CAD and adding to the downside pressure on the cross.
EUR remains under pressure against the USD, with the broader bearish trend intact as ongoing concerns over France’s debt position, elevated borrowing costs and renewed political gridlock continue to undermine confidence in the single currency. The rebound in oil prices is adding another headwind for the euro area by increasing pressure on energy-importing economies and reinforcing inflation concerns. Attention now turns to today’s ECB Monetary Policy Meeting Accounts for further insight into the Bank’s policy outlook, while U.S. Initial Jobless Claims will be watched for any fresh signs of labour-market weakness that could influence expectations for the timing of the next Fed hike.
GBPEUR holds broadly steady as both currencies consolidate, with the euro stabilising after recent losses while GBP remains supported by expectations that BoE policy will stay relatively restrictive. Attention today turns to comments from BoE and ECB policymakers, alongside the ECB’s September meeting accounts, for any fresh guidance on the relative policy outlook.
GBP edges lower against the USD ahead of speeches from Bailey and Lombardelli, with markets looking for any sign that the BoE could move toward a rate hike next month. GBP remains relatively resilient despite concerns over UK public debt and rising gilt term premia, with money markets pricing an 80%+ chance of a November hike and two quarter-point increases fully discounted by February.
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