Daily Currency Update

USD - US Dollar

The FX market has been quiet overnight in anticipation of today's significant financial events. The USD has seen a slight increase, largely due to a dip in GBP following subpar UK housing statistics. However, most major currencies are fluctuating within a +/- 0.1% range for the day at the time of writing. US stock futures are showing a slight upward trend, while bond performance is varied, with Treasurys lagging a bit during this session. US CPI data from yesterday offered varied insights: there was an increase in overall prices, an unexpected rise in core inflation (though at a decelerating rate), and indications of price stabilization. In essence, this data hasn’t really shed new light on anticipated policy changes. The market consensus is that the Fed is unlikely to raise rates next week, with a split opinion on any further rate adjustments before the year closes. Reports on US Retail Sales, PPI, and weekly claims will be released today, but the focal event might be the FOMC decision on the 20th. Additionally, the ECB's policy decision at 8.15ET might introduce some market volatility. As of now, the DXY remains within the 104.50/105 bracket highlighted yesterday, and any significant movement outside this range could provide a clearer market direction.

CAD - Canadian Dollar 

This morning, the CAD is outpacing most G10 currencies against the USD, boasting a 0.11% increase according to the Bloomberg table. The overall stability of the USD, consistent stock performance, a mild increase in crude oil prices, and slight gains across other commodities hint at a more optimistic trend influencing the CAD. However, the current spot appears to be valued higher than its equilibrium, which stands at 1.3349 today. For the CAD to experience a notable surge, we'd need to see better short-term spreads or a broader decline in the USD's strength. Observe the USD/CAD trends.

EUR - Euro

The ECB's policy decision today is anticipated to maintain current rates, based on a Bloomberg economists' survey. However, recent market data suggests a 65% chance of a 16-17bps tightening. A divergence in expectations is evident. We’re leaning towards a 25bps hike due to persistent inflation, with rates hovering around 5%. This likely will be the cycle's final hike, but President Lagarde might not rule out further tightening. The gap between Eurozone/US 2Y spreads has reduced since late August, which should've buoyed the EUR somewhat. A significant narrowing in the EUR's favor may arise from decreasing US yields.

GBP - British Pound

The GBP is lagging behind other G10 currencies, following a drop in the August RICS House Price Index to its lowest level since 2009, as indicated by data released yesterday. The decline to –68 in the index, which has been negative since last October, underscores the impact of increased rates on the housing sector. Although expectations for a BoE rate hike have slightly reduced after this data, swaps still project an 18bps tightening for the upcoming week.