The Morning Update

The USD weakens, oil prices rally, while equity and US yields are mixed, with focus remaining on the Fed. The dollar softened as markets leaned into expectations of a dovish Federal Reserve, with bets on a December rate cut and speculation that Trump may appoint ultra-dovish Kevin Hassett as the next Fed chair. While lagged US data haven’t significantly altered the macro picture, inflation stuck at 3% and limited labour-market weakness suggest markets may be pricing in too much easing too soon. Focus today will be on Fed Chair Powell’s speech, which could challenge or validate the market’s dovish positioning and set the tone for near-term dollar direction. Global equities started December under pressure, with US futures down—S&P 500 off 0.5% and Nasdaq 100 down 0.6%—as hawkish BOJ comments and softer risk appetite weighed on sentiment. Asian and European markets also weakened, led by Japanese stocks after Governor Ueda signalled a potential rate hike and two-year yields reached their highest since 2008. Focus now turns to Powell’s speech today and a heavy US data calendar as investors assess the outlook for the year-end equity environment. Elsewhere, oil prices rallied after OPEC+ reaffirmed its output stance and supply concerns intensified, while gold stayed firm amid broader market caution. Bitcoin and Ethereum fell sharply on Monday, sliding by over 4.5% and 6%, respectively, as risk-off sentiment and renewed regulatory pressures weighed on the broader crypto market. In Focus this week, Monday, Fed's Chair Powell speech, CAD Manufacturing PMI, & US Manufacturing PMI. Tuesday, EU Inflation report. Wednesday, US ADP Employment Change, ECB's President Lagarde speech, US ISM PMI. Thursday, EU Retail Sales, CAD Ivey PMI, & US Initial Jobless Claims. Friday, EU GDP, CAD Jobs Report, US Core PCE - Price Index and the Michigan Consumer Expectations will help drive currency market direction this week.

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In the news. Bitcoin drops 5% below $90,000, bearish factors rack up. Trump says he has made his choice to lead the Federal Reserve. Canadian Solar transfers assets to avoid US scrutiny on China. US says Ukraine talks productive as Witkoff heads to Russia. NATO considers being 'more aggressive' against Russia's hybrid warfare. A US strike on a Venezuelan vessel could be a war crime, say lawmakers. Netanyahu asks Israeli President for a pardon to end corruption case. Oil gains with attack on key Black Sea terminal and Venezuela risk. Treasuries fall as Japanese selloff ripples through bond markets. Canadian newspaper revenues plunge again as the industry confronts a deepening crisis.

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In currency markets. The Japanese yen rallied as hawkish BOJ signals boosted expectations of an upcoming rate hike. Meanwhile, the Norwegian krone weakened, particularly against the yen, amid the shift in relative rate expectations. The Chinese yuan held steady, supported by the PBOC's consistent policy despite broader currency market volatility. CNY & Asian currencies are flat on average against the USD. NOK weakens 0.3%, CZK, CHF, MXN, KWD, AUD, NZD, SEK, ZAR, and CZK are flat, DKK firmed 0.2%, PLN gained 0.3%, and JPY rallied 0.5% against the USD.

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In commodity markets. Oil prices strengthened by 1.1%. Natural Gas & Coffee Prices tumbled by 1.6%. Gold prices gained by 0.8%. Silver prices rallied by 1.7%. While Soybean prices eased by 0.3% and Wheat prices faded by 0.8%.

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CAD eased in early trading but remains supported after posting its biggest weekly gain since May, underpinned by a stronger-than-expected 2.6% Q3 GDP reading that prompted markets to trim expectations for further Bank of Canada easing. This week’s focus turns to Fed Chair Powell’s comments, alongside key Canadian releases including S&P Global Manufacturing PMI, the Ivey PMI, and labour-market data, all of which will help shape near-term expectations for the BoC’s policy path.

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EURCAD strengthened in early trading as the euro benefited from a cautious ECB policy outlook and traders positioned ahead of President Lagarde's upcoming comments. The focus this week will be on her guidance and key data releases that could influence relative ECB–BoC policy expectations.

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EUR is holding above 1.1600 as broad USD weakness supports the pair, though gains are capped by a cautious risk tone ahead of key US and Eurozone data this week. Technicals remain constructive with price above major SMAs, but sentiment-driven flows—especially around today’s Powell speech and the ISM Manufacturing PMI—will determine whether the pair can extend its recent advance or slip back into consolidation. Markets remain highly sensitive to Fed rate-cut expectations, keeping EUR/USD confined to familiar levels with only a mild bullish bias.

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GBPEUR is under pressure as the pound softens on concerns about the UK economic outlook and rising expectations of BoE rate cuts. Cautious market sentiment and relatively firmer euro dynamics are keeping the pair biased lower in early trading.

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GBP holds steady below 1.3250 as softer risk sentiment offsets support from UK Budget relief and ongoing US Dollar weakness. The pair’s upside remains limited as markets await Powell’s speech and key US data, while expectations of a near-term BoE rate cut continue to temper sterling momentum. Overall, GBP/USD is consolidating at elevated levels, with direction likely to be driven by incoming macro catalysts on both sides of the Atlantic.