Economic Outlook and Summary
October was the opposite of September. Where September was mostly a “risk-on” month thanks to Powell’s dovish comments at the end of August, October was full-bore risk off. A somewhat hawkish Fed rate cut and the run-up to the US election saw a broad-based shift into long US dollar positions and a sell-off of US bonds.
The US 10-year Treasury yield rallied steadily, rising from 3.69% at the beginning of October to 4.29%, where it closed on October 31.
The USD and Federal Reserve
Don't Waste Money With Banks.
Get Exchange Rates Up to 2% Better With KnightsbridgeFX
The US dollar index (DXY) took a one-way ride higher throughout October, rising from 100.47 at the beginning of the month and closing at 103.86 at month end. The index spiked to 105.40 in the wake of Trump’s win, then consolidated the gains after the November 7 FOMC meeting. The Fed cut rates by 25% to 4.75%, which came as no surprise to markets and justified the move because they are confident that inflation will continue to fall to its target while trying to maintain the economy’s strength.
The next Fed meeting is December 18. It will be an entertaining seven weeks as global markets will attempt to balance the effect of incoming economic data and what it means for Fed policy, with inflationary risks from the Trump 2.0 administration. The data should overshadow the Trump speculation because Trump does not take control until January 20, 2025.
The Canadian Dollar and Bank of Canada
The Canadian dollar was a casualty of revised outlooks for Fed rate cuts, the surge in US 10-year yields and the “just-in-case-Trump-wins” trades. The US dollar was in demand across the board and the Canadian dollar weakened steadily through October. The Bank of Canada cut rates by 50 bps on October 23 due to low inflation and weak economic growth. Two weeks later, and the Canadian economy is weaker than expected and inflation is still falling, raising expectations for a follow-up 50 bp rate cut on December 11. However, the surprise (to many) Trump victory and his penchant for tariffs may force policymakers to adopt a slower easing trajectory.
Oil Prices
WTI oil prices were choppy but stuck in a 66.05-77.60 range. OPEC announced it would delay December’s planned production increase until January 2025.
We are built to beat bank exchange rates and save you money
KnightsbridgeFx is registered with FINTRAC, under the MSB registration number M09819788. Like most financial institutions, we are required to validate the identity of all clients. We have strict measures in place to protect your privacy.
Our Offices
Main office (Appointment only)
First Canadian Place
100 King Street West
Suite 5700 Toronto, ON,
M5X 1C7
(416) 479-0834
Toll-Free: 1-877-355-5239
Fax: 1-877-355-5239
All rights reserved. Knightsbridge Foreign Exchange
Currency Exchange Canada.
