The Morning Update

The USD eases, oil prices firm, and equity markets are mixed, as US yields rise, with markets focusing on the interest-rate outlook. The US dollar eased late Wednesday after earlier gains from strong economic data faded amid a rebound in risk sentiment and ongoing concerns about the prolonged government shutdown. The ADP report showed private payrolls rose by 42,000 in October—well above expectations—while the ISM Services PMI came in at 52.4, signalling healthy business activity. Despite the upbeat data and the positive tone in equities, lingering fiscal uncertainty weighed on safe-haven demand for the dollar, leaving it slightly weaker heading into Thursday’s session. Asian equity markets are showing resilience and edging higher, while European stocks are languishing amid caution over stretched valuations and a tech-selloff. The divergence comes as Asian investors lean into regional opportunities, even as sentiment in Europe remains muted. Investors appear to be shifting focus toward region-specific fundamentals rather than broad global momentum. Elsewhere, oil prices edged higher amid signs of tighter supply and improving demand expectations, while Bitcoin remained under pressure following renewed risk aversion in the digital asset market. Gold firmed as investors sought safety amid geopolitical uncertainty and a softer U.S. dollar. In focus today are the BoE interest rate decision and the BoE Governor's speech, as well as the CAD Ivey PMI, and a flurry of speakers from the Fed and ECB, which will help drive intraday direction in currency markets.

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In the news. Milei defies calls to float the Argentine peso freely. Putin signals Russia may start nuclear weapons tests in response to Trump. The Bank of Canada is to slash 10% of jobs as Carney targets the public sector. Norway's central bank keeps rates on hold, plans to cut next year. Brussels opens investigation into Deutsche Börse and Nasdaq over derivatives. Reeves sees reward in keeping lid on UK inflation in Budget. Federal budget's $1 trillion investment goal could be an underestimate, Carney says. Budget incentives will enhance productivity if executed well, BoC Macklem says. US to cut 10% of flights on shutdown, spare routes abroad.

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In currency markets. The Japanese yen strengthened on renewed safe-haven demand amid geopolitical uncertainty and weaker global risk sentiment. The Norwegian krone firmed after Norges Bank held rates at 4% and signalled a cautious stance toward future easing. Meanwhile, the South African rand remained fragile, supported by modest gains in commodity prices but weighed down by concerns over fiscal and global growth. CNY and Asian currencies on average firmed 0.1% against the USD. Trading currencies mostly rebounded, with KWD falling 0.15%, AUD, and MXN flat, CHF, NZD, SEK, DKK, and PLN up 0.1%, JPY, ZAR & CZK gaining 0.25%, and NOK strengthening 0.3% against the USD.

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In commodity markets. Oil prices gained 0.8%. Natural Gas prices rallied 1.8%. Gold prices firmed 0.65%. Silver prices strengthened 0.9%. Copper prices up 0.3%. Coffee prices tumbled 1.3%. Wheat prices weakened by 1.1% and Soybean prices fell 0.9%.

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CAD traded flat in early Thursday trading, stabilizing after Wednesday’s decline that saw it touch a near seven-month low around 1.4140 per U.S. dollar. The loonie remains pressured by the expansive federal budget, which doubles the deficit through heavy spending aimed at offsetting U.S. tariffs and boosting infrastructure and defence investment. Bank of Canada Governor Tiff Macklem reinforced a cautious tone, warning that interest rates may still not be restrictive enough to return inflation to target and emphasizing that the central bank would maintain a vigilant stance even as fiscal policy turns more stimulative. Focus today will turn to the release of the Ivey Purchasing Managers Index (PMI), which could provide a fresh signal on economic activity and influence the CAD’s near-term trajectory.

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EURCAD extended its gains after the euro found support from steady Eurozone retail sales figures, which came in line with expectations and signalled stable consumer demand. Meanwhile, the Canadian dollar remained subdued amid fiscal concerns and tepid domestic sentiment, allowing the pair to hold near its recent highs.

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EUR regained the 1.1500 level as steady Eurozone retail sales came in line with expectations, supporting the euro and easing some pressure on the U.S. dollar. Investors are also closely monitoring a flurry of speeches from European Central Bank and Federal Reserve officials for fresh guidance on the direction of monetary policy. With the U.S. dollar facing headwinds from a prolonged government shutdown and caution remaining high, the market is awaiting concrete signals before making further moves.

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GBPEUR edged higher as the pound firmed ahead of the Bank of England’s policy announcement, while the euro weakened following softer Eurozone retail sales. The latest data showed a 0.1% monthly decline in consumer spending, missing forecasts and adding pressure to the single currency. Investors remain focused on whether the BoE will hold rates at 4% or signal potential easing, particularly after UK Chancellor Rachel Reeves hinted at possible tax hikes in her upcoming budget.

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GBP edged higher ahead of the Bank of England’s policy decision, holding just above the 1.3000 mark against the U.S. dollar. The BoE is widely expected to keep its benchmark rate steady at 4%, with markets assigning only a modest probability to a rate cut amid lingering fiscal uncertainty and inflation still well above target. Chancellor Rachel Reeves’ warnings of potential tax increases have added to the cautious tone, while investors will closely watch the vote split and tone of the meeting minutes for clues on the bank’s next policy steps.