The Morning Update

The USD steadied, oil prices slipped, and equity markets were mixed, while U.S. yields pushed higher ahead of a key inflation release. The greenback held firm against the euro and sterling in early trading after stronger-than-expected U.S. growth data dampened expectations for further Fed easing, leaving the euro near a three-week low and sterling hovering around 1.3350. Market attention now turns to the Core Personal Consumption Expenditures Price Index, the Fed’s preferred inflation gauge, which will provide critical guidance on the policy outlook at the October FOMC meeting. European equities rose on Friday, with the Stoxx 600 up 0.5%, shrugging off new U.S. tariffs that hit Asian markets earlier in the session. President Trump announced duties of up to 100% on drugs and 25–50% on trucks and furniture, but investors judged much of the risk as priced in, with Roche and Novo Nordisk recovering early losses. Wall Street futures edged higher, though sentiment stayed cautious as strong U.S. data dampened expectations for aggressive Fed easing ahead of the key inflation report. “Excitement on AI and Fed rate cuts turbo-charged the bull market and sent global​ and US equities to new highs,” Barclays Plc strategists led by Emmanuel Cau wrote in a note. “But with much of the Goldilocks narrative arguably in the price now, and positioning higher, investor fatigue is palpable as we hit an air pocket ahead of next week’s non-farm payrolls report and third-quarter earnings.” Elsewhere, oil prices slip, but are headed for their biggest weekly gains in more than three months. Bitcoin continues under pressure, slipping below $109,500, while gold and silver prices edge higher. In focus today are the US Core PCE Price Index, CAD GDP, the Michigan Consumer Expectations and Sentiment Index, and the UoM 1 & 5 Consumer Inflation Expectations, which will help provide intraday direction to currency markets.

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In the news. Trump announces 100% tariffs on branded pharmaceutical products. Denmark drone incidents expose vulnerabilities in European airspace. TikTok to be valued at $14bn after Trump's deal, White House says. The US charges ex-FBI chief Comey, who investigated Trump's alleged ties to Russia. The UK is to announce plans for digital ID cards. "Time to Stop, Trump vows Israel will not annex the West Bank. Microsoft halts services to Israeli military unit amid probe into surveillance of Palestinians. Oil set for biggest weekly gain in three months as Russia cuts fuel exports. Canada Post workers go on nationwide strike after government calls for reform. Canadian natural gas producers cut output amid record-low prices. UAE seeks a deal with Canada to double trade, the Economy Minister says.

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In currency markets. The JPY slipped to an eight-week low as markets reacted to new U.S. tariffs, including 100% on branded drugs and 25% on heavy-duty trucks. The Pound sees its biggest weekly fall since July, as fiscal and macro worries in the UK collide. CNY and Asian currencies are flat on average against the USD. Trading currencies are mixed, with AUD and ZAR easing 0.2%, SEK, NOK, NZD, and CZK are down 0.1%, CHF, MXN, KWD, and PLN are flat, and DKK is up 0.1% against the USD.

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In commodity markets. Oil & Wheat prices eased 0.45%. Natural Gas prices firmed is up 0.1%. Gold prices firmed by 0.3%. Silver prices rallied 1.7%. Copper & Soybean prices fell 0.25%.

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CAD continues under pressure, testing a fresh 1-year low against the USD as the greenback strengthened broadly on the back of robust U.S. GDP and labour data. The loonie eases in early trading with traders awaiting domestic GDP figures for direction on Bank of Canada policy. Strong U.S. consumer spending and business investment have tempered expectations for further Fed rate cuts, which have boosted the dollar against its major peers. Markets remain cautious on Canada’s outlook, with analysts highlighting consumer weakness despite recent BoC easing. Governor Tiff Macklem reaffirmed the central bank’s commitment to supporting growth while keeping inflation under control.

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EURCAD maintains a mildly bullish bias, with forecasts pointing toward the 1.6350, underpinned by policy divergence, as the Bank of Canada has already begun easing. In contrast, the ECB maintains a more cautious stance on rate cuts. Markets are focused on today’s Canadian GDP release, expected at +0.1%, which will shape near-term CAD momentum. A weaker print would reinforce dovish BoC expectations and lift the pair.

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EUR is drifting near multi-week lows, stuck below 1.1700, as traders await the next inflation signal from the U.S. Early strength in U.S. GDP and jobless claims boosted the dollar, weighing on the euro. Over in Europe, ECB policymakers like Yannis Stournaras have hinted that rates may be “at a good equilibrium” and that further easing isn’t a given. Meanwhile, the eurozone economy is viewed as fragile, and some ECB officials are keeping their options open amid uncertainty about growth, trade, and energy. The upcoming U.S. PCE inflation reading will likely be the next major driver for whether the euro can regain ground.

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GBPEUR remains under pressure against the euro as UK fiscal concerns, weak business surveys, and rising expectations for BoE rate cuts weigh on sentiment. The pound’s struggles contrast with a steadier euro, supported by the ECB’s cautious stance on further easing. Analysts see downside risks for GBP/EUR, with forecasts pointing toward the lower end of its recent 1.14–1.15 range if UK economic weakness persists.

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GBP is set for its biggest weekly fall since July, pressured by UK fiscal concerns, weak economic data, and a resurgent dollar after strong U.S. growth figures boosted Fed repricing. A surprise jump in public borrowing, softening factory and services activity, and a poorly received gilt auction have undermined confidence, driving sterling nearly 1% lower this week. Rising gilt yields, which would typically support the currency, instead highlight investor unease over the UK’s long-term finances, with 10-year yields hitting 4.775% before easing. Attention now turns to Finance Minister Rachel Reeves’ November budget, expected to include tax hikes as she seeks to reassure markets and uphold fiscal credibility.