The Morning Update

The USD steadies, oil prices ease, equity markets are mixed, and US yields rise as risk-on sentiment improves. The USD steadied while G10 currencies improved, supported by rising risk appetite as the Fed signalled further rate cuts ahead. Markets remain cautious, with policymakers split on the pace of easing and inflation risks still in focus. Asian equities weakened on Thursday, while U.S. stock futures advanced after the Federal Reserve delivered its first rate cut of 2025 and signalled more may follow to support the economy. The S&P 500 futures rose 0.9% and Nasdaq 100 futures gained over 1%, recovering from volatility after Wednesday’s quarter-point move. European markets also opened firmer, lifted by optimism around easier global monetary conditions. Still, sentiment stayed cautious as traders balanced the prospect of two more cuts this year with Chair Jerome Powell’s warning that “there are no risk-free paths” in managing inflation and jobs.“The ‘front-loading’ is probably the most important part of all this,” said Michael Brown, research strategist at Pepperstone Group Ltd. “If labor market weakness persists, then the Fed will continue to cut. The monetary backdrop is set to become much easier, much sooner.” Elsewhere, oil prices slipped on concerns about U.S. economic weakness and persistent oversupply. Bitcoin rallies towards $117,5000 on further Fed rate-cut hopes, while gold retreated from record highs and silver traded steady. In focus today, the BoE and BoJ interest rate decisions, US Initial Jobless Claims and Philadelphia Fed Manufacturing Survey will help drive currency market direction today.

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In the news. The ECB dumps more than Euro 150 million of world bonds. China drops Google antitrust probe during US trade talks. Saudi Arabia signs 'strategic mutual defence' pact with Pakistan. The Federal Reserve cuts rates by quarter point on Wednesday and signals more to come. UK talks to join EU defence fund stalled over participation fee. Hyundai adjusts full-year forecast, citing tariffs, ahead of investor day. Trump to meet Starmer after hailing UK-US special relationship. French unions strike against austerity, pressuring Macron. Canada's banks could lend an additional $1 trillion to help the economy adapt, federal regulators says. Carney to unveil budget on November 4th with 'substantial' deficit.

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In currency markets.The BOJ rate decision is due tonight, and markets widely expect policymakers to keep rates on hold. Ahead of the meeting, USD/JPY is steady near recent highs, NZD/USD is supported by firm risk sentiment and yield differentials, while MXN/USD remains resilient as investors favour carry trades despite U.S. policy uncertainty. CNY is flat, while Asian currencies ease by 0.2% on average against the USD. Trading currencies mostly improve, with JPY weakening 0.3%, AUD KWD & CHF are flat, DKK, CZK, and ZAR up 0.15%, MXN and NOK gained 0.25% and NZD strengthened by 0.5% against the USD.

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CAD is steady in early trading, holding below 1.3800 after the Bank of Canada cut its policy rate by 25 basis points to 2.5%, matching the Fed’s move on Wednesday. Policymakers cited a weaker labor market, with unemployment above 7%, and less pressure from inflation, which Tuesday’s CPI report showed remains within the 1–3% target range. Governor Tiff Macklem indicated at least one more cut is likely this year, with markets assigning a 40% chance in October and 75% by December. The loonie traded in a tight range, reflecting choppy sentiment as investors weighed easing campaigns in both Canada and the U.S.

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EURCAD is holding near 15-year highs, driven by diverging monetary policy between the Bank of Canada and the European Central Bank. The Canadian dollar has weakened as the BoC leans dovish amid soft domestic data, while the euro is supported by the ECB’s more cautious stance on easing. This policy gap continues to make the euro relatively more attractive against the loonie.

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EUR climbed back above 1.1830 as the Dollar’s post-Fed recovery lost steam amid firmer risk appetite. The Fed cut rates by 25 bps and signaled more easing ahead, though policymakers were split and Chair Powell called it a “risk management cut” while cautioning on persistent inflation. His less dovish tone initially boosted the Dollar, but momentum has since shifted in favor of the Euro. Lagarde’s reminder that disinflation is over and policy will stay data-dependent, alongside upcoming U.S. data releases, leaves moderate risk appetite likely to cap the Dollar’s upside.

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GBPEUR is flat ahead of the BoE’s interest rate decision today. The Bank is expected to hold rates at 4% while slowing bond sales, reinforcing a cautious outlook. Policy divergence with the ECB’s less dovish stance continues to support the euro over the pound.

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GBP edged higher toward 1.3600 in early European trading on Thursday, while the U.S. Dollar slipped. Attention now turns to the Bank of England’s policy decision later today, where rates are expected to remain unchanged. Recent UK labor data showed steady unemployment and easing wage growth, though these figures had little impact on the pound. Upcoming U.S. retail sales data may provide fresh direction for the dollar.