The NZD is the strongest and the EUR is the weakest as the North American session begins

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As the North American session begins, the NZD is the strongest of the major currencies while the EUR is the weakest. The US dollar is mixed/lower with gains versus the EUR, JPY and declines vs the CAD, AUD and NZD. The greenback is little changed vs the GBP and CHF.

The US weekly mortgage application data came in stronger in the current week. The home data from last month (I. E. existing home sales and new home sales) were lower than expectations. Rates have continued their move to the downside with the 30 year mortgage rate falling to 7.17% from 7.37% last week. It reached a high of 7.9% during the week of October 20. That is the lowest rate since August. The low mortgage rate for the year was back in February near 6.2%

US mortgage rate falls to the lowest level since August

In the UK, in its latest Financial Stability Report, the Bank of England (BOE) indicated that the full impact of the recent interest rate hikes will take time to manifest. The report, assessed the current risk environment as challenging, and noted that some valuations of risky assets still appear overstretched. However, it also highlighted that the banking system is well-capitalized, though there are signs that net interest margins might have peaked. The report acknowledges significant vulnerabilities in market-based finance. Additionally, BOE Governor Andrew Bailey commented on the uncertain outlook for inflation and stated that interest rates are likely to remain around their current levels. He emphasized the BOE’s vigilance regarding financial stability risks that may arise in the future

In Japan, Ryozo Himino, the Deputy Governor of the Bank of Japan (BOJ), stated that the central bank does not have a predetermined schedule for exiting its easy monetary policy. In his remarks he emphasized that the decision to exit will depend on a variety of factors beyond just wages and prices. These include consumer spending, capital expenditures, and international developments. The BOJ acknowledges the need to make a decision amidst a mix of economic signals but expresses uncertainty about how close they are to sustainably achieving their price target. Himino also suggested that the side effects of the easy policy might lessen as they approach the path to exiting this policy.

Australia’s GDP growth for the third quarter (July, August, September) of 2023 was slower than expected, recording a modest increase of 0.2% quarter-on-quarter, which is the weakest growth in two years and below the anticipated 0.4%. This sluggish growth was primarily driven by government expenditure and capital investment. Government final consumption expenditure increased by 1.1%, and investment by public corporations surged by 8.9%, focusing on transport, communication, and utilities projects. Private engineering construction also saw a rise, mainly due to increased investment in the mining industry. Concurrently, the terms of trade declined by 2.6%, and the household saving to income ratio fell sharply to 1.1% from 2.8%, marking the lowest savings rate since December 2007. This decrease in savings is attributed to the rising cost of living, impacting Australian households.

The economic calendar is full today with ADP kicking off the releases 15 minutes earlier than what we normally expect at 8:15 AM ET. Below is the scheduled key releases and events:

  • ADP nonfarm employment (8:15 AM ET) is expected to rise by 131K versus 113K last month.
  • Canada labor productivity (8:30 AM ET) is expected to decline by -0.6% versus -0.6% last month
  • Canada trade balance (8:30 AM ET) is expected to come in at 1.6 billion versus 2.0 billion last month
  • US revised nonfarm productivity (8:30 AM)for the 3Q is expected at 4.9% versus 4.7%. Unit labor costs are expected to decline -0.9% versus -0.8%
  • US trade balance (8:30 AM ET)as expected to show a deficit of $-64.1 billion versus $-61.5 billion last month
  • Bank of Canada’s interest rate decision will take place at 10 AM ET with no change expected (at 5.0%). The rate has remained at 5% for two consecutive meetings.
  • Canada Ivey PMI (10 AM ET) is expected to commit a 54.2 versus 53.4 last month
  • ECBs Nagel is expected to speak at 10 AM ET.

At 10:30 AMET, the weekly oil inventory data will be released with crude oil inventories expected to show a drawdown of -1.3M versus a build of 1.6M last week. The private data released late yesterday showed

  • Crude oil build of 0.594M,
  • Gasoline inventories showed a build of 2.83M and
  • Distilates showed a build of 0.890M.

A snapshot of the markets to kickstart the North American session shows:

  • Crude oil is trading down $-0.60 or -0.83% at $71.73. At this time yesterday, the price was at $72.93
  • Spot gold is trading up up $7.05 or 0.35% at $2026.23. At this time yesterday, the price is at $2025.31.
  • Spot silver is trading down to three cents or -0.10% at $24.12 . At this time yesterday, the price was at $24.33
  • Bitcoin is trading at $44,080. At this time yesterday, the price was way down at $41,859.

In the US stock market, the major indices are implying a marginally higher opening after a mixed close yesterday. The Dow Industrial Average and S&P index fell yesterday while the Nasdaq index closed higher. A snapshot of the market currently shows:

  • Dow Industrial Average futures are implying a gain of 62.4 points . Yesterday the Dow Industrial Average fell -79.88 points or -0.22%
  • S&P index futures are implying a gain of 9.82 points. Yesterday the S&P index fell -2.60 points or -0.06%
  • NASDAQ index futures are implying a gain of 4141 points. Yesterday the Nasdaq Index rose 44.41 points or 0.31%.

In the European equity markets, the major indices are trading mixed.

  • German DAX, is trading up 0.27%. Yesterday the German DAX rose 0.78% and closed at a record high of 16533.12.
  • France’s CAC, is trading up 0.49%. Yesterday France CAC rose 0.74%
  • UK’s FTSE 100, is trading up 0.49%. Yesterday UK’s FTSE 100 fell -0.31%
  • Spain’s Ibex, up 0.10%. Yesterday Spain’s Ibex rose 0.59%
  • Italy’s FTSE MIB, up 0.64% (10 minute delay). Yesterday Italy’s FTSE MIB rose 0.56%

In the Asia Pacific market major indices:

  • Japan’s Nikkei index, +2.04%
  • China’s Shanghai Composite Index, -0.11%
  • Hong Kong’s Hang Seng index, +0.83%
  • Australia’s S&P/ASX index, +1.65%

In the US debt market, yields are trading higher :

  • US 2Y T-NOTE: 4.6095% +3.2 basis points. At this time yesterday, the yield was at 4.612%
  • US 5Y T-NOTE: 4.173% +3.5 basis points. At this time yesterday, the yield was at 4.187%
  • US 10Y T-NOTE: 4.195% +2.4 basis points. At this time yesterday, the yield was at 4.226%
  • US 30Y BOND: 4.319% +1.4 basis points. At this time yesterday, the yield was at 4.384%
  • 2 – 10-year spread is trading at -41.4 basis points. At this time yesterday, the spread was at -38.8 basis points
  • 2 – 30 year spread is trading at -28.8 basis points. At this time yesterday, the spread was at -23.3 basis points

In the European debt market, benchmark 10-year yields are trading marginally higher:

European benchmark 10-year yields

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