The Morning Update

The USD slips, oil prices are lower, equity markets are mixed, and US yields rise amid ongoing Fed uncertainty. The USD slips as traders reassess Fed expectations, with markets still pricing in rate cuts but potentially fewer or later than previously thought. Strong U.S. consumer spending has tempered hopes for aggressive easing, limiting downside in the dollar. Tuesday’s retail sales release is the next major catalyst, with a soft print likely to deepen USD losses, while an upside surprise could quickly reverse the move. Global equities are mixed, with tech leading modest gains as investors position ahead of a heavy week of U.S. data and rising expectations for a December Fed rate cut. While U.S. futures and European markets are firmer, sentiment remains cautious as concerns over stretched AI-driven valuations linger and trading volumes thin into the holiday week. Asia delivered a similarly uneven performance, highlighted by Alibaba’s rebound but offset by weakness in crypto and broader risk appetite. Elsewhere, oil and gold prices are sliding, with analysts pointing to profit-taking and a stronger dollar as key headwinds. Meanwhile, in the crypto space, Bitcoin is weakening around the USD 85,000 level, with some commentators warning of “chaos” ahead unless critical support holds. In focus this week, on Monday, is the ECB President Lagarde's speech. Tuesday, German GDP, US PPI & Retail Sales. Wednesday, US Durable Goods & US Initial Jobless Claims. Thursday, US Thanksgiving, CAD Current Account, & EU Consumer Confidence. Friday, German Retail Sales, CHF GDP, German Inflation report, CAD GDP will help drive the currency market direction this week.

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In the news. US & Ukraine report progress in peace talks. EU to tighten investment rules to stand up to China. Investors warn Reeves against delaying the fiscal plan in the Budget. Oil declines further as investors weigh hopes for Ukraine peace talks and uncertainty over the Fed rate cut. EU to urge US to apply more of the July trade deal, including cutting steel tariffs. Canada and India agree to restart trade talks, the Indian government says. Canada says it will resume US trade talks 'when appropriate'. Canada Post and the Union reach a deal in principle to end strike and lockdown actions.

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In currency markets. The yen remains under heavy pressure near 10-month lows, with markets watching closely for possible Tokyo intervention as U.S. rate-cut bets weaken the dollar more broadly. Meanwhile, the euro is firmer, sterling is steady ahead of the UK budget, and the NZD and AUD remain soft, with traders expecting an RBNZ cut and awaiting Australia’s CPI for clues on RBA policy. CNY is flat, while Asian currencies gain 0.3% on average against the USD. Trading currencies are mixed, JPY & SEK weakening 0.3%, NOK & NZD down 0.1%, AUD & KWD flat, MXN up 0.1%, CHF, DKK, ZAR, CZK & PLN firming 0.2% against the USD.

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In commodity markets. Oil, Gold, Silver & Soybean down 0.3%. Copper falls 0.5%. Coffee prices rose 0.2%, while wheat prices fell 0.9%.

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CAD continues under pressure in early trading, after suffering its largest weekly decline in two months amid softer retail sales and falling oil prices. September retail sales dropped 0.7% and a flat October estimate, alongside cooling inflation, have reinforced expectations that the Bank of Canada may need to cut rates below neutral next year. With oil down nearly 2% and the U.S. dollar firming, the loonie briefly touched its weakest level since early November before stabilizing.

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EURCAD strengthened in early trading as falling oil prices and softer Canadian data continued to weigh on the loonie. The move highlights the CAD’s sensitivity to commodity weakness, even as broader euro sentiment remains relatively subdued.

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EUR strengthens in early trading, supported by a softer U.S. dollar and resilient sentiment ahead of a busy week of euro-zone and German data releases, with traders also looking to an upcoming speech by Christine Lagarde for policy signals. Meanwhile, the Federal Reserve is increasingly expected to cut rates, with futures pricing in a high probability of a move and putting additional downward pressure on the dollar. Market activity is expected to quieten later in the week as U.S. Thanksgiving thins liquidity, potentially amplifying short-term moves in euro pairs.

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GBPEUR is softer as sterling faces renewed pressure ahead of this week’s UK budget, with fiscal uncertainty and weaker domestic data weighing on sentiment. Markets remain cautious as rising Bank of England rate-cut expectations add to the pound’s vulnerability against a steadier euro backdrop.

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GBP is steady around 1.3100 in early trading, with the pound flat as investors adopt a cautious stance ahead of this week’s UK Autumn Budget. While softer UK data and rising expectations for a Bank of England rate cut limit sterling’s momentum, the upcoming budget remains the key domestic risk event as markets assess potential fiscal measures and their impact on growth and borrowing. Meanwhile, the dollar stays supported by tempered but still-present Fed rate-cut expectations, keeping GBP/USD tightly range-bound.