The Morning Update

The USD holds steady, oil prices weaken, equity markets are up, and US yields rise ahead of key central bank rate decisions this week. The U.S. dollar holds broadly steady as investors remain cautious ahead of a pivotal week for global monetary policy. The Fed and BoC announce rate decisions on Wednesday, followed by the ECB on Thursday and the BoJ on Friday, with markets focused less on the widely expected near-term outcomes and more on guidance for further tightening into year-end. Global equity markets are broadly higher as easing oil prices improve risk sentiment and investors look ahead to a heavy week of technology earnings. U.S. futures and European shares advance, with Alphabet, Microsoft and Amazon in focus for clues on the sustainability of AI spending, while French assets also benefit after Moody’s left the country’s credit rating unchanged. Elsewhere, oil prices weaken from recent six-month highs as tentative diplomatic efforts around the Middle East reduce some immediate supply concerns, while gold edges higher as softer crude eases inflation fears ahead of this week’s Fed decision. Bitcoin slips below recent levels as investors remain cautious ahead of the central-bank meetings and a heavy week of technology earnings. Today sees a light economic calendar, with currency markets expected to remain cautious ahead of the Fed's interest rate decision on Wednesday.

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News Headlines. Brazil's Lula wins historic presidential election; Bolsonaro reportedly refuses to concede. Neocloud stocks fall as Elon Musk says more than 200 of them face 'guppy-level death'. Stocks and bonds cautious ahead of a 'formidable' week of risk. Oil slips but stays near six-month highs on Saudi attacks. After Vucic defeat, Serbia waits to see how student-backed leaders will govern. Japanese companies compensate users as cyberattacks buffet economy.  US retailers face record holiday delivery prices from surcharges tied to costlier diesel. Bank of Canada expected to hike rate on Wednesday to stem spillover of energy inflation. Trump says Canada tariff deal coming 'soon' at Michigan rally. Britain will not join Canada-led defence bank initiative. Conservative party wins first election in nearly a century in British Columbia.

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In currency markets. Against the USD, EUR firms modestly after Moody’s left France’s credit rating unchanged and easing oil prices provided some relief to the energy-importing euro area. JPY weakens as investors await this week’s BoJ decision, with the central bank expected to hold rates while keeping the door open to further tightening later in the year. Broader FX markets remain subdued ahead of a heavy central-bank week, with the Fed, ECB and BoJ all in focus.

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In commodity markets. WTI -2.05% | Nat Gas -4.92% | Gold +0.50% | Silver +0.09% | Copper +0.25% | Palladium -0.67% | Coffee -2.03% | Cocoa -1.45% | Soybeans -1.36% | Wheat +0.16%

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CAD slips in early trading after reaching a five-week high last week, with weaker oil prices weighing on the loonie as Middle East supply concerns ease. Markets continue to price a high probability of a 25bp BoC hike on Wednesday following firmer retail sales and recent hawkish guidance, while the Fed is expected to hold rates unchanged the same day. The relative tone of the two central banks will be key for CAD, particularly whether the BoC signals further tightening while the Fed remains cautious on its next move.

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EURCAD firms in early trading as the euro draws support from Moody’s decision to leave France’s Aa3 rating unchanged, easing some of the pressure on French bonds, while softer oil prices weigh modestly on CAD. This week’s focus is firmly on Wednesday’s BoC decision and Thursday’s ECB meeting, with markets looking for confirmation of the relative policy paths into year-end. The BoC is widely expected to tighten or at least maintain a hawkish bias, while the ECB is expected to hold rates but keep the door open to another hike later this year, leaving EURCAD sensitive to any divergence in forward guidance.

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EUR is broadly unchanged against the USD as renewed demand for French bonds following Moody’s decision to keep France’s Aa3 rating offsets lingering fiscal and political concerns. A stronger-than-expected German Ifo survey is also providing some support, although investors remain cautious ahead of the Fed on Wednesday and ECB on Thursday. With both central banks expected to hold rates, attention will be on guidance around inflation and the timing of any further tightening.

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GBPEUR is broadly flat near 17-month highs around 1.19 after last week’s strong advance. GBP remains supported by expectations for a November BoE hike and relatively resilient UK activity, while the euro has found some support after Moody’s left France’s rating unchanged. Attention this week turns to the ECB decision and UK fiscal developments for the next catalyst.

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GBP is largely sidelined against the USD after retreating from last week’s five-week highs, with markets cautious ahead of Wednesday’s Fed decision. The Fed is widely expected to hold rates, although December hike expectations remain elevated, while the BoE is still seen as likely to raise rates in November following firmer UK growth, inflation and wage data. That relative policy backdrop should continue to limit GBP downside ahead of Thursday’s U.S. PCE inflation report.