The Morning Update

The USD is unchanged, oil extends gains, equity markets are higher, and US yields are steady as Middle East tensions simmer and earnings cheer. The U.S. dollar holds broadly steady, supported by renewed safe-haven demand as Middle East tensions intensify and rising oil prices revive inflation concerns. Gains remain limited, however, by lower Treasury yields and reduced expectations for an October Fed hike, while investors also watch major technology earnings for their impact on broader risk sentiment. Global equity markets are broadly higher, with strong results from SpaceX and Super Micro easing recent concerns around the sustainability of AI-related spending. U.S. futures and European shares gain while Asian markets rebound, although higher oil prices and elevated bond yields continue to temper sentiment ahead of Meta and Tesla earnings. Elsewhere, oil prices rise as renewed attacks around the Strait of Hormuz and falling U.S. inventories revive supply concerns, while Bitcoin also firms on improved risk appetite following strong U.S. corporate earnings. Gold is broadly sidelined as higher oil prices and firmer rate expectations offset safe-haven demand. Today's light economic calendar means markets will focus on earnings and comments from ECB President Lagarde to help provide intraday direction.

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In currency markets. Against the USD, the Mexican peso weakened amid cautious risk sentiment, while the Norwegian krone gained support from elevated oil prices driven by ongoing Middle East tensions. The Australian dollar rebounded toward three-week highs, supported by hawkish comments from the Reserve Bank of Australia, stronger Chinese economic data and a softer USD as U.S. Treasury yields eased.

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In commodity markets. WTI +1.43% | Nat Gas -1.62% | Gold -0.04% | Silver -0.87% | Copper -0.81% | Palladium -1.66% | Coffee +1.70% | Cocoa -2.00% | Soybeans -0.30% | Wheat -0.78%

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News Headlines. French 10-year bond yields hit 5% for the first time since 2002 amid unrest. Musk says Tesla and SpaceX formed special committees to discuss a merger. Finnish president hails progress in talks about ending Russia's war in Ukraine. The Indian mega-refinery drawing Rubio's interest. The EU probes pro-Kremlin disinformation around French riots. The UN warns the world is headed for a 2.8 °C warming as fossil fuel emissions keep rising. Trump pledges to spend $400 million on Republican Party midterm campaigns. Anthropic logged a net loss of over $80 billion in the first half of 2026. US Food importer sues Trump over Canada tariffs. 'Great result for Canada' says Carney as Alberta votes to reject separatism.

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CAD holds near four-week highs against the USD, supported by a sharp narrowing in Canada-U.S. yield differentials as markets price in roughly an 80% chance of a BoC rate hike next week, while Alberta’s decisive remain vote has removed a source of domestic political uncertainty. Firmer oil prices are adding support to the loonie, and TSX futures are edging higher as gains in energy shares offset weakness in gold-linked miners.

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EURCAD extends its decline as renewed French political and fiscal concerns weigh on the euro, with French-German bond spreads widening toward recent extremes. CAD remains supported by higher oil prices, a narrowing Canada-U.S. yield gap and increased expectations for a BoC rate hike next week, keeping the cross under downward pressure.

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EUR eases modestly against the USD but remains above 1.1200, with political unrest in France and a further rise in French borrowing costs continuing to cap the single currency. France’s 10-year yield has climbed to a 24-year high and the spread over German Bunds has widened sharply, while a softer USD and expectations for a Fed pause next week are limiting the euro’s downside. The widening French risk premium is also reinforcing concerns that fiscal stress could become a more persistent drag on sentiment toward euro-area assets.

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GBPEUR extends gains toward fresh multi-month highs, supported by firmer UK rate expectations after stronger labour data and sticky inflation reinforced the case for the BoE to keep policy tight. The euro remains the weaker side of the cross as France’s political unrest, rising borrowing costs and widening spreads over German Bunds continue to weigh on sentiment toward the single currency.

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GBP extends gains against the USD after hotter-than-expected UK inflation strengthened expectations for a BoE rate hike in November. Headline CPI rose to 3.5% and core inflation to 2.8%, reinforcing a more hawkish UK rate outlook, while the USD remains pressured by expectations for a Fed pause and renewed concerns around AI-driven growth. Markets are also pricing a broader tightening cycle into 2027, giving GBP additional support as UK-US rate expectations continue to diverge. Attention now turns to Friday’s UK Retail Sales and PMI data.