The strongest to the weakest of the major currencies
The NZD is the strongest and the GBP is the weakest as the North American session begins. Today is a semi-holiday in the US with the US bond market closed in observance of Columbus day. The US stock market is open, however. In Canada, they are on full holiday as they celebrate Thanksgiving.
The day is not without news after a weekend of violence in Israel.
Iran is reportedly being indirectly involved, a claim supported by a European official and a Syrian government adviser. Iran’s mission to the United Nations expressed support for Gaza’s actions but denied having directed them. The IRGC ( Iran’s Islamic Revolutionary Guard Corps) is said to be working on creating a multi-front threat against Israel, involving various militant groups. Iran is reportedly focusing its resources on supporting militias that are antagonistic to Israel, including Hamas and Hezbollah. The attack on Israel was also allegedly intended to exploit the country’s internal political divisions and to disrupt U.S.-brokered talks aimed at normalizing relations between Saudi Arabia and Israel. The coordination among Iran and Arab militias poses a significant threat to Israel, reminiscent of the former Soviet Union’s support for Israel’s Arab enemies, but potentially more dangerous given Iran’s clear opposition to Israel. There are reports of 1200 deaths and thousands of injured.
The Israeli shekel is under pressure as a result of the attack. The Bank of Israel has announced a program to sell up to USD 30 billion in foreign exchange to help support their currency. Additionally, Reuters reported that the bank will provide liquidity to the market through a swap mechanism of up to USD 15 billion as needed.
Oil prices have also risen sharply (up 3.5%) due to the increased uncertainty in the Middle East. The conflict exacerbates existing fears about oil supply. U.S. crude futures and the Brent contract have both seen significant increases in prices. This rebound comes after both experienced steep losses the last week, attributed to concerns that high-interest rates could dampen global growth and reduce fuel demand. Although Israel and Palestine are not significant contributors to the global energy market, the conflict could influence the geopolitical strategies of major oil producers in the region. Existing supply strains are also attributed to Saudi Arabia and Russia’s decision to extend output reductions until 2023. The surge in oil prices is raising concerns about sustained inflationary pressures, potentially leading to prolonged high borrowing costs globally.
U.S. stock futures are implying a lower open influenced by the escalating conflict and anticipation of upcoming inflation data later this week. The intensification of conflict over the weekend has compounded existing market vulnerabilities tied to concerns over inflation and high interest rates, and continued uncertainty in Washington as they ponder leadership in the House following the ousting of the Speaker of the House Kevin McCarthy last week. Recall, on Friday, the US reported a higher than expected increase in non-farm payroll, but more tepid unemployment rate and hourly earnings balanced those job gains (to some extent). The key US consumer price data will be released on Thursday. The odds for a hike currently is around 25% at the next policy meeting. The ongoing conflict has negatively impacted market sentiment ahead of a series of bank earnings reports expected in the coming days.
The only economic release today is the US employment trends in the US at 10 AM (was 113.02 last month). Nevertheless, there are a number of Fed speakers today:
- At 13:00 BST / 08:00 EDT, Fed’s Barr (Voler, Neutral) is scheduled to speak at the American Bankers Association annual convention.
- At 14:00 BST / 09:00 EDT, Fed’s Logan (2023 Voter, Hawk) will discuss monetary policy at the National Association for Business Economics Annual Meeting.
- At 17:50 BST / 12:50 EDT, Fed’s Jefferson (Voter, Dove) is set to speak at the American Bankers Association annual convention.
A snapshot of the markets as the NA session gets underway shows:
- Crude oil is trading up $3.27 or 3.95% $86.07. At this time are Friday, the price was at $82.25.
- Spot gold is trading up on the increased tensions with the price trading up $16.24 or 0.89% $1848.88. At this time on Friday, the price is trading at $1821.90.
- Spot silver is trading up $0.04 or 0.20% at $21.62. At this time of Friday the price is trading at $21.11.
- Bitcoin is trading at $27,460. At this time of Friday the price is trading at $27,731.
In the US premarket for US stocks, futures are implying a modestly higher open
- Dow Industrial Average futures are implying a decline of 149.58 points. On Friday the index rose 288.01 point.
- S&P index futures are implying a loss of -24 points. On Friday the price was 50.31 points
- NASDAQ futures are implying a decline of -107 points. On Friday the price rose 211.51 point
In the European equity markets, the major indices are mostly trading lower:
- German DAX, down -0.82%
- France’s CAC, down -0.52%
- UK’s FTSE 100, up 0.19%
- Spain’s Ibex, down -1.0%
- Italy’s FTSE MIB, -0.48% (10 minute delay)
In the US debt market, markets are closed. On Friday at the close
- 2-year yield, 5.0812% %
- 5-year yield, 4.751%
- 10-year yield, 4.794%
- 30-year yield, 4.959%
- The 2 – 10 year spread is trading at -33.1 basis points. On Friday morning,
