The Morning Update

The USD holds steady, oil prices firm, equity markets rally, and US yields are mixed as risk sentiment improves. The U.S. dollar holds broadly steady as attention shifts to Friday’s key jobs report, which will be important for December Fed expectations. Today’s jobless claims and Fed commentary may provide some direction, while markets continue to digest the implications of a Democratic-controlled Congress. Global equity markets are mixed as the post-election rotation continues, with cyclical and previously underperforming markets gaining while chipmakers remain under pressure on concerns over tighter U.S. data-centre regulation. European and parts of Asian markets are outperforming, while Nasdaq futures lag. Overall, the backdrop remains positive for risk as lower bond yields, softer oil prices and easier financial conditions broaden support beyond the technology sector. Elsewhere, oil prices firm modestly after their sharp post-election decline, while gold extends its rally as lower Treasury yields and a softer dollar continue to support demand. Bitcoin is also firmer, recovering alongside the broader improvement in risk sentiment. Today’s economic calendar includes the Bank of England’s interest rate decision, Monetary Policy Report and Governor Bailey’s press conference, U.S. Initial Jobless Claims and preliminary Q3 Nonfarm Productivity, alongside speeches from BoC Governor Macklem, ECB President Lagarde and Fed officials Hammack and Barkin, followed by Canada’s federal budget announcement.

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News Headlines. Democrats look to reshape after historic midterm victories. US midterm results herald upheaval in Middle East policy. Russia deepened Iran support with missile launcher deal. Oil tumbles below $100 on post-election peace hopes. OpenAI pledges to pay for data centre power after election highlights AI concerns. Bomb alerts force flights to land in France, Bulgaria and Belgium. ANC support falls sharply in early South African municipal election results. Toyota hikes annual outlook and unveils $89 billion shareholder return plan. France hit by more protests, strike, macron seeks to contain unrest. Finland court convicts Russian captain, and Azerbaijani crew member over Baltic Sea cable damage. Canada says midterms won't change trade stance, and sees talks with the US officials.

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In currency markets. Against the USD, the Norwegian krone and Mexican peso were among the few currencies holding firm in early trading, while most other G10 currencies eased as the dollar stabilized following its post-midterm election sell-off. The peso benefited from improved risk sentiment and lower U.S. Treasury yields, while the krone showed resilience despite falling oil prices, with attention turning to today’s Norges Bank and Banxico interest rate decisions.

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In commodity markets. WTI +0.58% | Nat Gas -0.81% | Gold +1.57% | Silver +1.02% | Copper -0.46% | Palladium +2.24% | Coffee +0.63% | Cocoa -2.38% | Soybeans +0.25% | Wheat +0.84%

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CAD continues to advance near seven-week highs against the USD, supported by broad greenback weakness, last week’s BoC rate hike and Canada’s wider trade surplus. Sentiment around U.S.-Canada trade relations has also improved following the midterm elections, with investors increasingly seeing a Democratic-controlled Congress as a potential constraint on the administration’s more aggressive trade agenda. Attention now turns to Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers for further guidance on the scope for additional tightening, while Friday’s Canadian employment report remains the next major test for the loonie.

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EURCAD eases modestly in early trading as CAD remains supported by the BoC’s hawkish stance, improved sentiment around U.S.-Canada trade relations and expectations that Friday’s Canadian jobs report could reinforce the case for further tightening. The euro remains relatively firm after stronger inflation and hawkish ECB commentary, but CAD’s recent outperformance is keeping the cross under pressure near 1.5650 area.

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EUR trims earlier gains but remains on track for a fourth consecutive daily advance, despite weaker-than-expected German factory orders. The broader backdrop remains supportive as sharply lower energy prices ease pressure on the Eurozone’s import bill, firmer October inflation keeps expectations for further ECB tightening alive, and the USD remains soft following the U.S. midterm elections. Lingering concerns over France’s fiscal outlook continue to cap the upside.

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GBPEUR holds broadly steady ahead of today’s BoE decision, with markets almost fully pricing a 25bp increase to 4.0%. The focus will be on the MPC vote split and Governor Bailey’s guidance on whether further tightening is likely, particularly after the recent fall in energy prices has eased some inflation concerns. The euro remains supported by lower oil prices and firmer Eurozone inflation, leaving the cross with limited direction ahead of the announcement.

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GBP retreats from earlier highs as investors reduce exposure ahead of today’s BoE decision, with a 25bp hike to 4.0% widely expected. The key focus will be the MPC vote split, updated inflation and growth forecasts, and Governor Bailey’s guidance on whether further tightening is likely. A modest recovery in the USD is also limiting GBP/USD gains, although the broader dollar backdrop remains soft following the Democratic sweep of Congress.