Good morning. The dollar and long-term Treasury yields are holding steady, equity futures are pushing upward, and the Canadian dollar is inching forward. We see four primary factors driving currencies ahead of the North American open:

Relative interest rate differentials are moving against the dollar after yesterday’s Federal Reserve minutes showed officials turning wary on raising rates too much. According to the record of the September policy meeting, “Participants generally judged that, with the stance of monetary policy in restrictive territory, risks to the achievement of the committee’s goals had become more two-sided,” with “all participants” agreed on the need to “proceed carefully”. Borrowing costs have risen sharply since the meeting on a deluge of Treasury issuance and growing evidence of economic resilience, prompting a series of cautionary statements from policymakers – including Governor Waller, who yesterday said “Financial markets are tightening up, and they’re going to do some of the work for us”.

Oil prices are stabilizing after yesterday’s drop, gaining overnight after Saudi Energy Minister Prince Abdulaziz bin Salman said “We need to take precautionary measures” to keep markets balanced, displaying a sense of unity with his Russian counterpart – Deputy Prime Minister Alexander Novak – in a joint television interview. Both the West Texas Intermediate and Brent benchmarks came under pressure during yesterday’s session when the International Energy Agency said “demand destruction” was hammering US gasoline consumption, and tumbled after the New York Times said US intelligence agencies thought Tehran was “surprised” by the weekend’s terrorist attack on Israel, helping lower the likelihood of a direct Israeli attack on Iranian interests.

Ebbing volatility concerns are providing support to Europe’s previously-beleaguered currencies. The euro and pound are nearing intraday resistance levels established in mid-September, inching higher despite a lack of improvement on the fundamental front: the British economy met forecasts in growing 0.2 percent in August, and the European Central Bank’s survey showed a marginal increase in year-ahead inflation expectations during the same month.

Traders are bracing for turbulence around this morning’s US consumer price data, which is expected to show both headline and core measures rising by 0.3 percent month over month in September, up 3.6 and 4 percent year over year, respectively. A softer-than-anticipated outcome could kill already-low odds on final rate hike in 2023, but used car prices could play havoc with the print – the category has moved erratically throughout the post-pandemic period – and the “core services” segment carries the potential for surprise.