BOE Expectations & Political Uncertainty Driving GBP

The latest UK inflation figures released yesterday were seen keeping pressure on the BOE ahead of the upcoming November 3 rd rates meeting. September headline bounced back to July’s 40-year highs of 10.1% following a small decline over August. With fears of a further push higher in coming months, traders are expecting the BOE to take aggressive action on rates.

While BOE policy action looks somewhat simple to gauge, the UK political landscape is a lot more complicated. PM Liz Truss looks to be hanging on to her premiership by a thread after. Chaotic day yesterday which saw her Home Secretary resigning and a turbulent fracking vote in the commons with polls now suggesting the opposition party have as much as a 30-point lead.

Key Factors for Today

- USD softer at the open today despite hawkish Fed commentary
- Equities lower through middle of week as bond yields rise
- CAD leading in FX, higher oil prices supporting
- BOJ intervention chatter continues
- Gold and silver near lows, oil turning higher

Coming Up

- USD Philly Fed manufacturing
- USD Existing home sales
- NZD New Zealand trade balance

Equities Soften As Bond Yields Pick up

Equities prices have turned lower through the middle of the week as an uptick in bond yields linked to fears of a global slowdown lean on sentiment. Yesterday’s UK, Eurozone and Canadian CPI prints are keeping the focus firmly on further central bank tightening. Hawkish comments from Fed’s Kashkari proved interesting given his typically dovish leaning, leading the market into starting to price in a further 75bps hike from the in December also.

Tesla Shrugs Off Q3 Revenues Miss

Shares in Tesla are trading a little higher ahead of the open today following a disappointing set of Q3 earnings yesterday. While Elon Musk’s firm was seen posting EPS of $1.05, beating Wall Street’s $1.01 estimate, revenues were seen undershooting forecasts. The firm cited weaker economic conditions as the main issue but sought to downplay analyst fears of slowing demand.

CAD Leading in FX as Oil Supports

In FX, we’re seeing a much more even start to the G10 block with USD softening a touch at the open today. CAD has been the stronger performer so far, helped by the rebound in oil prices off the midweek lows. Yesterday’s CAD CPI was a mixed bag with some measures falling slightly and some slightly higher but all in all showed there was no further upward momentum, which has been taken as a positive for the domestic economy.

BOJ intervention chatter continues

Into the back end of the week, more Japanese officials have commented on the JPY decline. Japanese Fin Min Suzuki commented today that the recent one sided move in JPY cannot be tolerated and warned that authorities will respond appropriately. However, JPY still remains weak for now.

Muted Action in Metals – Oil Rallies on EIA Surprise

In the metals and commodities space, both gold and silver are sitting near recent lows despite a softer USD today. Hawkish Fed commentary is keeping Fed tightening expectations well animated, keeping the near-term outlook for metals skewed to the downside. Oil prices have turned higher through the middle of the week. Yesterday’s EIA release reported an unexpected drawdown in inventories which has helped lift sentiment along with a muted tone to USD so far today.