The Morning Update

The USD is flat, oil extends losses, equity markets are mostly down, and US yields are mixed amid a tempered Fed outlook. The U.S. dollar traded mostly flat as investors weighed recent central bank signals and risk sentiment following the Federal Reserve’s cautious tone on future rate cuts. The greenback held near multi-month highs, supported by safe-haven demand amid lingering global uncertainties. However, a lack of fresh economic catalysts kept currency markets range-bound, with traders awaiting new data to guide the dollar’s next move. Global equity markets declined, led by weakness in European and Asian shares, as investors grew cautious following a volatile week dominated by tech earnings and central bank decisions. The Stoxx 600 fell for a fourth straight session, and Asian indexes slipped, weighed by renewed concerns over stretched valuations and slowing growth momentum. However, U.S. stock futures climbed, supported by upbeat results and guidance from Amazon and Apple, which helped restore some optimism around the technology sector. Despite the rebound in U.S. futures, market sentiment remains fragile as traders balance hopes for AI-driven growth against uncertainty surrounding monetary policy and global trade developments. Elsewhere, oil prices extended their decline, weighed by a stronger U.S. dollar, weak Chinese demand, and ample global supply. Gold remained under pressure amid fading safe-haven demand, while Bitcoin steadied as momentum cooled following recent gains. With the ongoing US shutdown, there will be no US data releases on the economic calendar, so the focus will be on the CAD GDP, and Fed's Bostic and Hammack will provide intraday direction.

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In the news. Trump-Putin Budapest summit axed after Moscow memo. Russia uses missiles in Ukraine that led Trump to quit the nuclear treaty, Kyiv says. China's Xi holds court at APEC summit after Trump trade truce. Hungary's PM Orban flags pension top-up as tough 2026 election nears. China and Canada leaders meet for the first time since 2017 to reset ties. Nvidia forges AI deals with South Korea's biggest companies. Canada's MEG delays vote on $5.4 billion oil takeover yet again.

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In currency markets. The yen edged higher on Friday after Japan’s new finance minister pledged to closely monitor currency moves, though it remains on track for its worst monthly performance since July. A stronger-than-expected Tokyo inflation reading complicated the Bank of Japan’s policy outlook, reinforcing expectations that rates will stay on hold for now. Meanwhile, the U.S. dollar stayed firm near multi-month highs, supported by cautious remarks from Federal Reserve Chair Jerome Powell and ongoing risk aversion in global markets. CNY is flat, while Asian currencies slip 0.1% on average against the USD. Trading currencies come under pressure, with NZD weakening 0.4%, UAD, ZAR, PLN & NOK falling 0.3%, JPY & MXN down 0.1%, CHF, KWD, EK, DKK, and CZK are flat against the USD.

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In commodity markets. Oil prices fell 0.35%. Natural Gas prices rallied 3.5%. Gold & Soybean prices slipped 0.1%. Silver prices are down 0.5%. Copper prices gained by 0.6%, and Wheat prices weakened by 0.7%.

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CAD weakened further in early European trading toward the 1.4000 mark, as the Canadian dollar came under pressure despite a broadly firm U.S. dollar. The move followed hawkish commentary from the Federal Reserve, which diminished expectations of imminent U.S. rate cuts, while optimism that the Bank of Canada would end its easing cycle offered only limited support to the loonie. Analysts note that the pair may find short-term support near 1.3950, but remain wary of further upside for the U.S. dollar if current conditions persist.

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EURCAD extends gains, supported by renewed demand following the European Central Bank’s cautious but steady policy stance. Softer Canadian growth indicators and lingering pressure on the loonie after recent rate cuts added to the pair’s upward momentum. With sentiment favouring the euro, EUR/CAD continues to trend higher, showing a modest bullish bias in early trading.

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EUR holds steady above 1.1550 after the European Central Bank kept interest rates unchanged at 2.0%, maintaining that policy is “in a good place.” The decision followed data showing the Eurozone’s flash headline HICP rose 2.1% year-on-year in October, in line with expectations and slightly below September’s 2.2%, while core inflation increased to 2.4%. The results supported the ECB’s cautious stance, indicating that inflation pressures remain moderate but persistent, with policymakers likely to remain data-dependent in upcoming decisions.

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GBPEUR continues under pressure as investors continue to favour the single currency following yesterday’s European Central Bank decision to keep interest rates on hold at 2.0%. The ECB’s steady stance, along with slightly firmer Eurozone inflation data, has supported the euro’s resilience. In contrast, the pound remains under pressure amid expectations of a potential Bank of England rate cut and ongoing concerns about weak UK growth and fiscal uncertainty, keeping GBP/EUR tilted lower in early trading.

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GBP remains under pressure as the Bank of England signals potential rate cuts amid sluggish UK economic data and growing fiscal risks. Investors are also watching the upcoming UK Budget, where concerns over increased borrowing and tight fiscal headroom are weighing on the pound’s appeal. With the central bank potentially constrained by the government’s spending path, the outlook for the pound is looking increasingly fragile.