The Morning Update

The USD steadies, oil extends its losses, equity markets rally, and US yields rise as attention shifts to the US inflation report. The U.S. dollar steadies after Monday’s decline, supported by Fed Governor Waller’s call for another rate hike in December. Today’s U.S. CPI report is the key focus, with a firmer reading likely to reinforce Fed tightening expectations and support the dollar. Global equity markets are broadly higher, with Asian and European shares extending Monday’s rebound even as U.S. futures pause ahead of today’s inflation report. Nvidia remains a relative laggard as concerns around CEO Jensen Huang and the broader AI trade persist, while stronger semiconductor data and broader gains in banks and industrials help support risk sentiment. Elsewhere, oil extends its decline on growing Middle East peace hopes, while Bitcoin also weakens. Gold falls as higher short-term Treasury yields and firmer December Fed hike expectations weigh on demand. Today’s economic calendar focuses on U.S. CPI and Core CPI inflation, alongside speeches from the ECB’s Lane, BoE’s Pill and Fed officials Waller and Bowman, with the Bank of Canada’s Summary of Deliberations also scheduled.

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News Headlines. Trump says FBI is 'looking into' Nvidia's Jensen Huang. Top Federal Reserve official considers largest rate rise since 2022. The US removes planes from second UK military base after Iran threat. Oil falls below $90 as Trump pulls back from threat to strike Iran. China trade surplus exceeds $1tn for first 10 months of the year. Talks aimed at ending Russia's war in Ukraine resume. Anthropic IPO to raise as much as $64.4 billion, latest draft prospectus shows. Canada reimposes sanctions on 11 Iranian entities for contributing to nuclear activities. Canada says it is extending tariff relief on some US imports.

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In currency markets. Against the USD, most major currencies are largely sidelined as investors await today’s U.S. CPI report for clearer direction on the Fed’s December decision. NOK remains the notable underperformer as the sharp decline in oil prices continues to weigh on the currency, while broader FX moves remain relatively contained ahead of the inflation release.

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In commodity markets. WTI -1.11% | Nat Gas +1.24% | Gold -0.74% | Silver -0.51% | Copper -0.58% | Palladium +0.59% | Coffee +0.15% | Cocoa -4.04% | Soybeans +0.59% | Wheat +0.30%

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CAD remains under pressure near recent lows as weaker Canadian employment, softer oil prices and a wide Canada-U.S. rate differential continue to weigh on the loonie. Today’s BoC Summary of Deliberations will be watched for how strongly policymakers debated the need for further tightening, while the U.S. CPI report is likely to be the bigger near-term driver for USD/CAD by shaping expectations for a December Fed hike. A cautious BoC tone combined with firm U.S. inflation would leave CAD particularly vulnerable.

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EURCAD is little changed as both sides of the cross lack a clear catalyst ahead of today’s U.S. inflation data. The euro is holding relatively firm despite softer regional momentum, while the loonie is struggling to recover as weaker oil prices and reduced expectations for further BoC tightening continue to limit demand.

EUR trades slightly firmer, consolidating Monday’s recovery as the sharp fall in oil prices provides a more favourable backdrop for the Eurozone economy. Lower energy costs should ease imported inflation pressures and support household purchasing power, although recent regional data still point to uneven growth. The ECB remains firmly data-dependent, with policymakers keeping the possibility of another rate increase in December open if inflation proves persistent. Attention today is centred on U.S. CPI, the key near-term driver for EUR/USD and Fed rate expectations.

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GBPEUR is broadly flat as markets balanced last week’s BoE rate hike against expectations that the ECB could also tighten again in December. Falling oil prices are giving the euro some relative support, while GBP remains underpinned by the BoE’s still-firm policy stance; attention now turns to UK GDP on Thursday and Eurozone GDP on Friday for fresh direction.

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GBP eases slightly against the USD after Monday’s sharp rebound, with the pound holding near 1.34 as investors await today’s U.S. CPI report. Falling oil prices have eased some UK inflation concerns and slightly reduced expectations for aggressive follow-up BoE tightening, while Fed Governor Waller’s support for a December rate hike has helped keep the dollar underpinned. UK retail data were broadly subdued, leaving U.S. inflation as the main near-term driver for the pound.

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