The consensus among analysts is that the BOC will raise rates another 75bps, leaving the target rate at 4.0%. Lately, Canada has been "leading" the Fed since its meetings are scheduled before its southern neighbor's. Since both countries are facing similar situations, what the BOC does is often interpreted as a little foreshadowing of what to expect out of the Fed. Therefore, if the BOC doesn't deliver on expectations, it could shake confidence in the consensus that the Fed will also raise rates by 75bps. Canadian economic data has been doing relatively well over the last couple of weeks, which is seen supporting a strong move by the BOC. But there just recently was a fly in the ointment: US flash manufacturing PMIs fell into technical contraction this month. Canada doesn't have a comparable flash reading, meaning that the situation there could be similar, but it just isn't known. Canada first to pivot? Another difference is that Canada has had core inflation slowly falling unlike the US, but still above expectations. That has raised expectations that even though the BOC is expected to hike, it will do so "dovishly". That is, after the rate hike, Governor Macklem will tone down expectations of further aggressive hikes during his post-rate decision. The BOC releases the monetary policy report (MPR) at the same time as the rate decision, and that's likely to be poured over to find any clues about when the "pivot" will happen. If the bank lowers its economic projections, then that is likely to be taken as a sign that the next rate hike won't be as aggressive. Or that the BOC might even pause in December. How long can the BOJ stay put? Despite all that's been happening with the yen lately, the BOJ is expected to keep monetary policy unchanged when it meets later in the week. Inflation has been rising in Japan, but not enough to shake the banks' extreme easing position. But that doesn't mean that Kuroda couldn't influence the market in his extensive press conference following the meeting. As the yen has weakened over the last several months, calls have risen for the BOJ to do something. There have been at least two interventions so far to stop the slide in the currency. Although it's the BOJ who does the intervention, it's at the direction of the Ministry of Finance, which has allowed the central bank to remain aloof from the currency situation. What can be done The BOJ is currently applying a series of easing tools, from negative rates, to yield curve control to buying bonds. Although it could reverse course on any of those, should the BOJ decide to take measures, it most likely would come with first removing yield curve controls, since they are the least orthodox policy and would likely be interpreted as the least change in policy. However, it's not likely that will be decided at this meeting. But it could be something that Kuroda hints at during the press conference that could finally move the yen in a more permanent direction. Otherwise, smaller interventions might be the course, which would only increase speculation of coordinated action in the future.

AUD/USD Current Price: 0.6396 AUD/USD benefited from firmer stocks and easing US government bond yields. Australian annual inflation is foreseen up by 7% YoY in the third quarter of the year. AUD/USD gains upward traction but still needs to break above 0.6450. The AUD/USD pair hovers around the 0.6400 level early in the Asian session after peaking on Tuesday at 0.6411. The pair spent the first half of the day consolidating just above the 0.6300 level, gathering upward momentum during US trading hours. The advance can be attributed to the positive tone of US equities, as Wall Street managed to extend its recent gains on the back of encouraging earning reports. Additionally, market players are lifting bets the US Federal Reserve will slow the pace of tightening before year-end, as policymakers began expressing their concerns over the negative effects of higher rates. Whether AUD/USD could extend its gains will depend on the upcoming Australian data. The country will release the Q3 Consumer Price Index, expected to have increased at an annual pace of 7%. The quarterly reading is foreseen at 1.5%, decreasing from 1.8% in the previous quarter. The RBA trimmed Mean CPI is foreseen at 5.6% YoY, up from the previous 4.9%. Higher than anticipated figures may take a hit on the AUD as market players would favor increasing bets on a more aggressive Reserve Bank of Australia. AUD/USD short-term technical outlook The AUD/USD pair is holding above a Fibonacci level, the 23.6% retracement of its latest daily decline at 0.6345. The 38.2% retracement provides resistance at 0.6450. Technical readings in the daily chart fall short of supporting additional gains, yet at the same time, reflect decreasing selling interest. Technical indicators advance but remain below their midlines. At the same time, the pair is crossing above a now flat 20 SMA but remains the weekly high set on Monday at 0.6410. The longer moving averages, in the meantime, keep heading firmly south, far above the current level. In the near term, and according to the 4-hour chart, the risk skews to the upside. The pair trades above is 20 and 100 SMAs, with the shorter one en route to cross above the longer one. Technical indicators have lost their bullish momentum but remain near their daily highs well above their midlines. Support levels:  0.6275 0.6230 0.6190 Resistance levels: 0.6345 0.6380 0.6415 View Live Chart for the AUD/USD

EUR/USD - 0.9884 Euro's rise from Oct's 0.9632 trough to 0.9875 last Tue suggests further volatile swings above Sep's 2-decade trough at 0.9537 would continue, Fri's rally from 0.9705 and then yesterday's brief break of 0.9875 resistance to 0.9899 has retained daily bullishness but 0.9960 should remain intact. On the downside, only a daily close below 0.9808 would risk further weakness towards 0.9755. Data to be released on Tuesday Germany Ifo business climate, Ifo current conditions, Ifo expectations, U.K. CBI trends orders. U.S. redbook, monthly home price, consumer confidence and Richmond Fed manufacturing.

USD/DXY Tumbles, 2YR US Bond Yield Slumps 14 BPS, AUD Climbs Summary Japan’s Ministry of Finance (MOF) may have intervened in the FX market on Friday, buying Yen against the US Dollar near the 152 level, according to Reuters quoting a government official. In early Asian trade, the USD/JPY was trading around 147.70 after it hit a high at 151.94 on Friday. On his visit to Australia, Japanese PM Fumio Kishida told reporters that the government “cannot tolerate excessively volatile moves driven by speculative trading.” In the other currencies, the Bank of Thailand (Thai central bank) said over the weekend that it was closely monitoring a volatile, weak Baht, driven by Dollar strength. Thailand’s currency has depreciated by 13% against the US Dollar. USD/THB plummeted 1.5% to 36.60 (38.20 Friday). The US Dollar slumped against the other Asian and EMFX. Against the Singapore Dollar, the Greenback (USD/SGD) closed 0.60% lower to 1.4150 (1.4240). The British Pound (GBP/USD) rebounded 0.51% against the Greenback to 1.1300 (1.1215) as UK politics steadied following a week of turmoil. Boris Johnson pulled out of the Conservative leadership race paving the way for Richi Sunak to become Britain’s prime minister. The Dollar Index (USD/DXY) which measures the value of the Greenback against a basket of 6 major currencies, tumbled 0.80% to 111.80 (112.90 Friday). Broad-based US Dollar weakness boosted the Australian Dollar (AUD/USD) higher to 0.6380 from Friday’s 0.6280. The Kiwi (NZD/USD) soared by 1.26% to 0.5765 (0.5677). The Euro (EUR/USD) rebounded 0.82% higher, settling at 0.9860 in late New York from Friday’s open at 0.9780. Against the Swiss Franc, the Greenback fell to 0.9980 from 1.0043. Better-than-expected Canadian Retail Sales boosted the Loonie against the Greenback. The USD/CAD (Dollar-Canadian Dollar) slid to 1.3642 from 1.3775 yesterday. Differentials between the US and global bond yields narrowed which weighed on the Greenback. The benchmark US 10-year Treasury rate dipped to 4.22% (4.23%). In contrast the UK 10-year Gilt treasury yield rose 15 basis points to 4.04% (3.89% Friday). The two-year US bond yield tumbled 14 basis points to 4.47% from 4.61%. Wall Street stocks rallied. The DOW climbed to 31,210 (30,325) while the S&P 500 was last at 3,760. from 3,667. The NASDAQ rose 0.54% to 11,392 (11,070 Friday). Economic data released Friday saw New Zealand’s Trade Deficit climb to -NZD 1615 million, bigger than estimates at -NZD 1413 million. Japan’s Trade Deficit narrowed to -JPY 2.01 trillion from a previous -JPY 2.34 trillion. Japan’s Annual Core Inflation Rate in September climbed to 3% from a previous 2.8%, matching median estimates. UK September Retail Sales (m/m) fell to -1.4% against expectations of -0.5%. UK Public Sector Net Borrowing was higher at -GBP 19.2 billion from a previous -GBP 11.06 billion. Canada’s August Retail Sales (m/m) soared to 0.7% from a previous -2.5%, higher than estimates of 0.2%. Core Retail Sales were up at 0.7%, beating expectations of 0.4%. USD/JPY – The Dollar plummeted against the Japanese Yen to finish 1.79% lower at 147.65 from Friday’s opening at 150.20. In extremely volatile trade the USD/JPY pair hit a high at 151.94 while the overnight low recorded was at 146.15 following comments from Japan Inc. (Source: Finlogix.com) GBP/USD – Sterling found respite after UK politics steadied, closing at 1.1300 (1.1215 Friday). Following the resignation of Liz Truss, Boris Johnson withdrew from the Conservative leadership race paving the way for former finance minister Rishi Sunak to become British PM. Broad-based US Dollar weakness also boosted the British currency. AUD/USD – The Aussie extended its rally against the Greenback, soaring to a 0.6380 finish from 0.6280. Overnight high traded was at 0.6385. In early Sydney, the AUD/USD pair spiked to a high at 0.6414 before slumping back to 0.6370 where it currently stands. Me thinks some early Sydney banks triggered some stops. Just another manic Monday for the Battler! EUR/USD – The Euro finished 0.82% higher to 0.9860 (0.9778) buoyed by the overall weaker US Dollar. Overnight high traded for the shared currency was at 0.9869 while the overnight low recorded on Friday was at 0.9705. Like all the other FX pairs, trading was choppy. On the lookout The week ahead kicks off with a busy economic calendar scheduled today with the release of Global Flash Manufacturing and Services PMIs. Australia released its S&P October Global Flash Manufacturing PMI which was higher than estimates at 52.8 (from 52.4) but lower than September’s 53.5. Australia’s October Flash Services PMI dipped to 49 from a previous 50.6 and lower than median forecasts at 50.1 RBA Assistant Governor Christopher Kent is speaking currently at the CBA (Commonwealth Bank of Australia) Global Markets Conference in Sydney. Japan follows next with its Jibun Bank October Flash Manufacturing PMI (f/c 50.5 from 50.8), Japanese Jibun Bank October Flash Services PMI (f/c 51.7 from a previous 52.2 – ACY...

The pound has come under pressure once again, with political uncertainty building on economic concerns. Meanwhile, Snap shares have lived up to their name, with the Nasdaq coming under pressure as a result. Sterling slips as political uncertainty builds on wider bearish sentiment "The pound finds itself back under pressure today as traders are faced with yet another bout of political uncertainty and economic concerns. This morning's retail sales data highlighted the struggles facing consumers and businesses alike, with people spending 3.9% more for 6.9% less goods. Meanwhile, traders are faced with yet another bout of political uncertainty, with Penny Mordaunt officially throwing her hat into the ring for a potentially doomed two-year stint that will likely be dominated by inflation and recession." Snap shares drag Nasdaq into the red  "The tech-focused Nasdaq lagged its US peers today, with Snap shares capitulating on growing losses thanks to inflation fuelled advertising struggles. Slowing growth and rising losses bring little confidence for a stock that is largely priced on future revenues. Unfortunately, we are seeing both businesses and consumers tighten their purse strings thanks to rising costs, with advertising revenues dented as a result. With five of the top six largest stocks on the Nasdaq releasing earnings next week, we can expect plenty of volatility as traders weigh up the implications from rising inflation on spending habits."

Europe It’s been another negative day for European markets, although a retreat in short term yields, which is acting as a drag on the US dollar, is helping to support a rebound off the lows of the day. The FTSE100 even managed to claw its way back into positive territory during the afternoon session, despite retailers showing significant weakness on the back of another big slide in UK retail sales in September, while a profits warning from Adidas, isn’t helping either, prompting weakness in the likes of JD Sports, Frasers Group, while Next is also sharply lower, along with the likes of H&M and Zara owner Inditex. The rise in UK gilt yields is acting as a drag on house builders as concerns rise that the UK budget statement might be delayed by any new incoming Prime Minister. There’s been a positive reaction to the Q3 numbers from Deliveroo, despite the company downgrading its expectations for sales growth and upgrading its profit forecasts. The uplift is hugely welcome given that the shares are already close to record lows, and given a lot of pessimism is already in the price. Gross Transaction Value (GTV) saw an increase of 8% year on year, with the UK operation outperforming international markets, rising by 11%. Consequently, Deliveroo downgraded its full year guidance on GTV growth to between 4% to 8%, due to concerns about consumer disposable income. There was some good news as EBITDA margins were revised higher to between -1.2% and -1.5%, which suggests the company is making progress on reducing its costs by way of lower marketing spend. Holiday Inn owner Intercontinental Hotels Group is sharply lower after reporting its Q3 numbers, which were by and large a decent set of numbers. Q3 comparable hotel RevPAR rose 28%, with US business travel back at pre-pandemic levels. The business in China has continued to act as a drag with RevPAR was down 20% vs 2019 levels, with occupancy rates at 55%. The share price fall appears to be being attributed to the departure of CFO and Head of Strategy Paul Edgecliffe Johnson who is leaving to join Flutter. US US markets have edged higher in early trading as we head into the weekend, helped by a retrenchment in short term yields on speculation that a November rate rise of 75bps might prompt a pause or a slowdown in the pace of the Federal Reserve’s rate hiking cycle, from December. This retreat in 2-year yields appears to have been prompted by a trial balloon piece in the WSJ, that suggested just such a scenario. While this may well have a very short shelf life, it is nonetheless providing a decent end of week uplift, as we head towards the quiet period ahead of the next Fed meeting in November. Twitter shares have plunged on the open on reports that Elon Musk would cut the workforce by 75% as the deadline nears for completing the buyout, and amidst reports that US authorities could review the deal on National Security concerns. Snap once again looks set to be the canary in the coal mine for social media companies after reporting a poor set of Q3 numbers, with the shares plunging in early trade to a two year low. Q3 revenues came in at $1.13bn, which was still 6% higher than a year ago but slightly below expectations. This single digit rise was its lowest figure ever since it debuted in 2017, and even though the company reported a slight profit, investors appear unforgiving. The company also declined to offer guidance for Q4, with management citing an uncertain revenue visibility. The likes of Pinterest, Meta Platforms have also fallen in sympathy with Meta due to report next week. FX The pound has continued to come under pressure, and yields have pushed higher again on reports that the new fiscal budget plan might be delayed due to the resignation of Liz Truss as Prime Minister, while markets are also uneasy about the outcome of the new leadership election in what could be a run-off between ex-Prime Minister Boris Johnson and Rishi Sunak. The fear is that the Conservative party in its current form is so riven by partisanship that anyone who takes over, whether it be Rishi Sunak who appears to be favourite as is widely being predicted, there will always be one faction who will be unhappy if their candidate doesn’t win, which means there will always be those working in the background to undermine the winner. Jeremy Hunt, the current Chancellor is working on the assumption that the 31st October deadline will be kept, however any new PM might have a different view.  Any delay is unlikely to be well received by the Bank of England who will have to make a decision on interest rates...