Risk sentiment starts the day on an ever-so-slightly positive tone after yesterday’s late-day turnaround where equities and treasuries sold off while the USD strengthened across most pairs.

Much of the volatility has been driven by the US Treasury market, with safe-haven buyers (conflict in the Middle East) locking horns with Fed-concerned sellers (“higher for longer”).

Concerns that Israel is mobilizing for a major ground offensive in Gaza have lowered 10-year Treasury yields about 10 basis points from yesterday’s highs and moved oil prices almost 4% higher from yesterday’s close.

Adding to the volatility are comments this morning from Philadelphia Fed President Harker, where he reiterated keeping interest rates on hold “for a while,” barring a material change in data.

University of Michigan sentiment and inflation expectations data were released this morning, showing a worse-than-expected drop in the former and a higher-than-expected increase in the latter.

The only positive news of the day involves the major US banks that reported strong earnings growth.

EUR/USD is close to unchanged on the day as yesterday’s move of almost 1% lower stabilizes. There has been a theme emerging that the ECB is wavering on future rate increases, even as inflation runs significantly above target. This morning, ECB Governing Council member Knot stated that there are more signs that their policy tightening is taking hold, while also saying it is too early to declare victory over inflation. ECB President Lagarde also made comments this morning, saying they are “ready to do more if necessary.”

USD/CAD is marginally lower on the day even with the strong move higher in oil. The pair shows no signs of major retracement from yesterday’s move higher, almost 1% peak to trough, as Canadian existing home sales come in a full percentage point lower than expected by analysts. Canadian CPI is to be released next Tuesday.

GBP/USD is lower on the day, extending yesterday’s 1%+ move lower even with Bank of England Governor Bailey’s hawkish comments this morning. He highlighted that UK policy needs to stay restrictive and that they have more to do on inflation, even as they’ve made solid progress.

USD/MXN is relatively unchanged on the day, remaining above its 200-day moving average that was breached recently. While Mexico has one of the highest domestic interest rates across major currencies, interest rate curves show almost no signs of cuts over the next 6 months, a metric that has continued to support the Peso even as global risk worsens.

USD/BRL is marginally higher versus Wednesday, after yesterday’s local holiday, shrugging off the USD strength seen across the board yesterday. Brazilian Central Bank President Campos Neto is in Morocco with other global central bank leaders and may make unscheduled comments.