The Morning Update

The USD edges higher, oil prices firm, while equity markets are mixed, and US yields rebound as risk sentiment improves. There are growing calls in Israel to rethink the scope of the ground invasion of Gaza as talks to free hostages intensify and French President Macron becomes the latest world leader to visit Israel. The USD firms from Monday's lows and the Euro weakens after disappointing Eurozone PMI results. The 10-year treasury yield slipped to a one-week low after reaching its highest level since 2007 on Monday. Equity markets were mixed with Asian markets finishing in positive territory, while European markets started early trading down after data showed the French & German economies were struggling, but improved as the morning progressed. Oil advanced with ongoing Israel-Hamas war uncertainty. Bitcoin tests $35k, the highest level since 2022. Investors will be focused on Microsoft and Alphabet earnings, US PMI data, and ECB President Lagarde's speech to help provide intraday direction to currency markets

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In other news. Barclays Bank drops 6.5% in early trading after warning of Q4/23 cost-cutting changes. UK employment rises to 4.2%. The outlook for the Eurozone economy worsens as PMI hits the lowest levels in nearly 3 years and stirs up recession worries. Hamas releases two more hostages seized in assault in Israel. President Erdogan submits Sweden's NATO bid to Turkey's parliament. Nvidia to make Arm-based PC chips is a major new challenge to Intel. China's Great Wall Motor is the first EV maker to respond to the EU anti-subsidy probe.

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In currency markets. The USD bounced off a 1-month low after US yields dropped. Euro slips after disappointing PMI results increase recession fears. Currency markets are steady after the US Treasuries rebound from lows. The Reserve Bank of Australia keeps interest rates on hold at 4.1%. AUD gained after the governor said Australia wasn't out of the inflation woods yet, and further interest rate rises remained on the cards. CNY firms by 0.1%, while Asian currencies were down 0.1% on average vs USD. Trading currencies remain mixed with ZAR dropping 0.45%, SEK weakening by 0.3%, NOK & CHF slipping by 0.2%, while JPY, MXN & NZD were up 0.1%, and AUD strengthening by 0.45% vs USD.

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In commodity markets. Oil prices firmed by 0.6%, Natural Gas prices tumbled by 1.1%, Gold prices eased by 0.5%, Silver prices weakened by 0.8%, Copper prices were unchanged, Wheat prices dropped by 0.95%, and Soybean prices slipped just 0.1%.

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CAD holds near 1.3700 as global risk sentiment improves, oil prices bounce and US yields steady. The loonie is anticipated to hold within the current range as investors remain sidelined ahead of the Bank of Canada interest rate decision on Wednesday. The BoC is expected to keep interest rates on hold at 5%, while markets will be focused on Governor Macklem's comments for signs of future interest rate direction. In focus today, the US Composite, Manufacturing, and Services PMI will help provide intraday direction to currency markets.

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EURCAD weakens in early trading after weaker-than-expected Eurozone PMI data increases recession fears within the EU.

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EUR retreated below 1.0650 after Eurozone and German PMI data disappoints. Eurozone business activity took markets by surprise with October PMI dropping to 46.5 in October, its lowest level since November 2020. Dr de la Rubia Chief Economist at Hamburg Commercial Bank said "We wouldn't be caught off guard to see a mild recession in the Eurozone in the second half of this year with back-to-back quarters of negative growth". Intraday focus shifts to the US PMI data releases and comments from ECB President Lagarde's comments to provide direction.

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GBPEUR edges higher after recession fears across the EU put selling pressure on the Euro.

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GBP stalls below 1.2250 after jobs and PMI data. The ILO unemployment rate improved slightly towards 4.2% and employment levels slipped less than expected to -82k vs previously -207k. UK Composite PMI disappointed markets dropping below expectations to 48.6% increasing recession fears, but on a positive note Manufacturing PMI, although deemed bearish beat expectations at 45.2%. The pound improved vs Euro, but remains under pressure vs USD heading into the US PMI data releases later today.