Risk starts the week off on a positive note as reports circulate about President Biden considering a trip to Israel in an attempt to de-escalate the current conflict with Hamas.

US Secretary of State Blinken, who recently visited Israel followed by several Arab nations, returned there today amid signs of an ongoing dialogue.

Oil prices and the USD are retracing some of their strength from last week, while US equities, and, oddly enough, bond yields are higher.

Data-wise, it is a relatively light week, starting with the Empire Manufacturing index this morning, which showed a drop back into negative territory at –4.6, albeit by less than expected.

This week, Q3 earnings kick into high gear with Goldman Sachs, Morgan Stanley, Tesla, and Netflix reporting, among many others. In addition, the quiet period ahead of the next FOMC rate decision is approaching, and as such, there is an overabundance of Fed officials speaking this week, including Chair Powell on Thursday.

EUR/USD is higher on the day, even as one major investment bank calls for parity before the end of the year due to increased energy costs in the Eurozone resulting from the conflict in the Middle East. Event-wise, the German ZEW survey will be released on Tuesday, and the final September CPI for the Eurozone will be released on Wednesday.

USD/CAD is lower on the day, in line with other USD pairs, although today's relief in oil prices is likely curtailing major CAD strength. The market is looking to tomorrow’s CPI data for September for some clarity on the Bank of Canada’s fight against inflation. The YoY estimate is expected to be unchanged at 4%, while the MoM is expected to drop to 0% from 0.4% previously.

GBP/USD is higher on the day as The Bank of England’s Chief Economist Pill made balanced remarks earlier this morning. He mentioned the importance of not declaring victory over inflation prematurely but also that the “(BoE) will do what we need to do, won’t do too much.” UK CPI is to be released on Wednesday with expectations for a marginal drop to 6.0% YoY but also an increase in MoM to 0.5%.

USD/MXN is lower on the day, closer to the 200-day moving average, in line with peers. Even so, future volatility, as implied by the options market, continues to grow, with many traders seeing a bumpier road ahead for the pair.

USD/BRL is lower on the day as oil strengthens and bets that the BCB will be forced to slow rate cuts increase.