The Morning Update

The USD slips, oil prices steady, equity markets are mixed, while US yields rise amid bullish sentiment for 2026. The U.S. dollar is steady in early trading as investors avoid large positions ahead of key U.S. economic data. The main focus this week is on U.S. jobs and inflation reports, which are expected to shape expectations for future Federal Reserve policy. With those releases pending, market activity remains cautious and range-bound. Global equities were mixed, with Asian markets falling even as U.S. stock futures and European shares rose, signalling steadier risk sentiment after last week’s tech selloff. Asian stocks declined broadly, led by China, where data showed retail sales growth at its weakest since Covid and a further slump in investment, weighing on local benchmarks and dragging the region lower, while South Korea fell 1.8%. In contrast, sentiment toward U.S. equities remains constructive, with a growing wave of bullish calls for 2026 from major banks citing resilient earnings and the benefits of artificial intelligence. Strategists also see scope for further Federal Reserve easing if growth cools modestly, underpinning expectations of another year of solid gains for the S&P 500. Elsewhere, vopper prices are surging, with analysts warning the metal could reach stratospheric new highs as U.S. hoarding tightens supplies and demand from electrification and AI infrastructure accelerates. Bitcoin strengthened but remains capped near the $90,000 level, where resistance and cautious positioning continue to limit further gains. Gold prices are rallying on safe-haven demand and rate-cut expectations in 2026, while oil prices have stalled amid concerns over soft demand and ample supply. In focus this week: Monday, CAD inflation report. Tuesday UK Jobs report, EU & German PMI, US Jobs & NFP report, US PMI. Wednesday, UK Inflation report, UK PPI, CAD Portfolio Investment in Foreign Securities & Canadian Securities. Thursday, BoE Interest Rate Decision, US CPI, EU Interest Rate Decision. Friday, the BoJ Interest Rate decision, UK Retail Sales, CAD Retail Sales, & Michigan Consumer Sentiment will help drive currency market direction.

‍

In the news. Ukraine peace talks stretch into a second day at the start of a pivotal week for Europe. Russia says it destroyed 130 Ukrainian drones overnight, and some Moscow airports were disrupted. China's economy stalls in November as calls for reform grow. The EU yields to pressure from automakers as it rethinks the 2035 ban on combustion cars. The eurozone industry growth picks up, boosting the resilience narrative. US stock futures rise amid bullish calls for 2026. Canadian home prices dip as momentum stalls heading to year-end. Kast's landslide win propels Chile into a US-led conservative orbit.

‍

In currency markets. The Japanese yen has strengthened as investors raise expectations that the Bank of Japan will continue moving toward tighter policy, supported by signs of firmer wage growth and inflation. In contrast, the Swedish krona and Norwegian krone have weakened, pressured by softer risk sentiment and, in Norway’s case, subdued oil price momentum. The South African rand has strengthened, helped by rising gold prices and improved appetite for higher-yielding emerging-market currencies. CNY & Asian currencies firmed 0.1% on average against the USD. Trading currencies are mixed, with SEK tumbling 0.5%, NOK & NZD weakening 0.3%, CZK & CHF slipping 0.15%, KWD, AUD, DKK & PLN flat, MXN up 0.15%, and JPY & ZAR rallying 0.45% against the USD.

‍

In commodity markets. Oil prices slip 0.15%. Natural Gas, Copper & Gold prices strengthened 1%. Silver prices rallied 2.6%. Coffee prices eased 0.4%. Soybean prices up 0.15%, and Wheat prices weakened 0.6%.

‍

CAD is steady after posting its third straight weekly gain, holding below 1.3800 after touching its strongest level since mid-September against the USD, supported by expectations of monetary policy divergence between the Bank of Canada and the Federal Reserve. Markets see the BoC done cutting rates, with the prospect of hikes emerging in the second half of 2026, while investors continue to price in further easing by the Fed, a backdrop that has helped the loonie gain about 0.4% last week. Attention now turns to today’s Canadian inflation data, which is expected to show a pickup in price pressures, potentially reinforcing the BoC’s cautious stance and strengthening the case for rates to stay on hold for longer, or even move higher next year, despite softer oil prices and mixed bond yields.

‍

EURCAD is firmer in early trading, supported by better-than-expected Eurozone industrial production, which has lifted the euro ahead of this week’s ECB rate decision. Markets are focused on whether the ECB signals confidence in the recovery or maintains a cautious tone on policy going into 2026. On the Canadian side, today’s inflation data is in focus, with a stronger print likely to reinforce expectations that the Bank of Canada is done cutting rates, shaping near-term direction for the cross.

‍

EUR is edging higher but remains capped below 1.1750 as the U.S. dollar steadies and traders stay cautious ahead of a heavy data week. The euro found support from stronger-than-expected Eurozone industrial production, which reinforced the view that the region’s economy is showing resilience. Attention now turns to the European Central Bank’s policy decision later this week, where updated forecasts and guidance will be closely scrutinized. In parallel, delayed U.S. jobs data and CPI figures are expected to drive near-term direction, keeping the pair largely range-bound for now.

‍

GBPEUR is firmer in early trading as investors position ahead of a pivotal week for economic data and central bank decisions. UK jobs, inflation and retail sales figures will shape expectations for the Bank of England, where markets are widely pricing in a rate cut. Attention will also be on the ECB policy decision, with the outlook for relative policy paths likely to drive near-term moves in the cross.

‍

GBP is firmer in early trading, though gains remain tentative ahead of a busy and potentially pivotal week for sterling. Markets will closely watch UK jobs data, the inflation report, and retail sales for signals on economic momentum. Still, the primary focus will be the Bank of England’s interest rate decision. Investors are essentially pricing in a quarter-point BoE rate cut, reflecting softer growth and easing inflation, though guidance on the pace of easing in 2026 will be critical for the pound’s near-term direction.