The Morning Update

The USD strengthens, oil prices steady, equity markets are down, and US yields are mixed as caution grips markets. The U.S. dollar index strengthened as investors positioned cautiously ahead of key U.S. economic releases, including Thursday’s delayed September jobs report. Although the dollar later eased slightly against the euro, traders remained focused on incoming data for clearer signals on the Federal Reserve’s next policy move. Fed officials continued to strike a cautious tone, with Governor Waller arguing for further cuts while Vice Chair Jefferson urged a slower approach, leaving December rate-cut odds hovering around 50%. Global equity markets slipped as concerns over lofty valuations in the technology sector and uncertainty around the Federal Reserve’s rate-cut path weighed on investor sentiment. The S&P 500 futures were down about 0.2% after a sharp sell-off last week, while Europe’s STOXX 600 index also declined amid expectations that upcoming U.S. economic data could influence the policy outlook. Markets remain cautious heading into key earnings, such as those from Nvidia Corp., and the delayed U.S. jobs report, which may dictate whether the recent pull-back evolves into a deeper correction. Elsewhere, oil prices remained largely unchanged as supply-demand concerns lingered despite some easing of oversupply fears. Meanwhile, gold weakened as renewed strength in the U.S. dollar and reduced safe-haven flows weighed on the bullion market. Bitcoin came under pressure, briefly dropping below $90,000, as the broad risk-off mood and sharp selloff in tech shares unnerved investors. Concerns over stretched AI-related valuations and uncertainty surrounding the Fed’s rate path prompted traders to reduce their exposure to risk assets, including crypto.

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In the news. The UN Security Council approves US-backed proposal for Gaza. Crypto market sheds $1.2tn as traders shun speculative assets. Net immigration to the UK hit a higher peak than previously estimated. Home Depot cuts earnings outlook as home improvements demand falls short of expectations. India's goods trade deficit in October shatters records, beating estimates, as gold imports surge 200%. Saudi crown prince to visit the US for the first time since the Khashoggi scandal. Japan warns citizens in China about safety as diplomatic crisis deepens. German Navy to purchase C$1 billion Canadian combat management system, Canada's trade minister says. Canada's PM Carney survives crucial vote on his first budget. Senators push probe into Trump-linked crypto firm over token sales tied to North Korea and Russia.

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In currency markets. The yen hit a 9½-month low against the U.S. dollar as investors grew increasingly concerned about Japan’s expanding fiscal plans and the possibility that monetary tightening may lag behind other major central banks. The Mexican peso fell around 0.75%, pressured by a shift away from higher-yielding emerging-market currencies amid rising global uncertainty and cautious positioning ahead of key U.S. data. Meanwhile, the Swiss franc weakened by roughly 0.5%, giving back some of last week’s safe-haven gains as market sentiment stabilized slightly and investors rotated out of defensive assets. CNY is flat, while Asian currencies fell 0.3% on average against the USD. Trading currencies come under renewed pressure, with MXN, PLN & ZAR tumbling 0.75%, NOK weakens 0.65%, CHF falls 0.55%, DKK eases 0.35%, NZD, JPY & KWD down 0.15%, and outlier AUD gains 0.15% against the USD.

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In commodity markets. Oil & Wheat prices are flat. Natural Gas prices eased 0.45%. Gold & Copper prices fell 0.65%. Silver prices weakened by 0.8%. Coffee prices gained 0.5% and Soybean prices are up 0.3%.

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CAD continues under pressure, testing multi-week lows following data showing October inflation eased to 2.2%, reinforcing expectations that the Bank of Canada is likely to keep its policy rate on hold. Markets are also closely watching the upcoming housing starts report, with forecasts indicating a potential dip to around 265,000 units—a sign of a cooling construction sector. Alongside slightly lower oil prices and a firmer U.S. dollar, these domestic signals are keeping the loonie under pressure.

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EURCAD is drifting lower toward 1.6250 as softer Eurozone momentum and cautious ECB guidance continue to weigh on the euro. At the same time, expectations that the Bank of Canada will remain on hold, supported by steadier Canadian data, are helping keep the Canadian dollar relatively resilient.

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EUR remains under pressure as risk-averse sentiment boosts demand for the U.S. dollar ahead of a series of long-delayed U.S. economic releases, including this week’s non-farm payrolls. Eurozone growth concerns and lingering political and policy uncertainty continue to weigh on the currency, keeping EUR gains limited in the near term.

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GBPEUR firms in early trading as the euro remains pressured by risk aversion and softer Eurozone sentiment, while the pound finds some support after UK inflation for September held steady at 3.8% year-on-year, slightly below expectations. With markets reassessing the ECB’s policy path and digesting the UK’s latest inflation data, the cross remains tilted modestly in favour of sterling ahead of today’s US economic releases, which could further influence broader FX sentiment.

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GBP eased against the US dollar as markets digested softer UK inflation expectations alongside renewed support for the greenback. Sentiment toward sterling remains cautious, not only due to the inflation backdrop but also because next week’s UK budget is firmly in focus, with investors awaiting clarity on fiscal plans and potential implications for growth and Bank of England policy.