The Morning Update

The USD hold steady, oil prices fall, equity markets are up, and US yields rise with the Fed still in focus. The USD held steady even as markets sharply increased bets on a December Fed rate cut, following dovish comments from Fed officials Waller and Williams and a lack of fresh data after the government shutdown. Despite odds of a rate cut rising to 81%, the dollar index remains firm near 100, helped by year-end flows that are limiting immediate weakness. However, analysts note the USD looks overvalued relative to rate differentials, leaving it vulnerable if the market maintains a dovish Fed outlook. Global equities are broadly higher, lifted by a strong tech-led rally in the US that saw the S&P 500 post its best day in six weeks and the Nasdaq 100 log its biggest gain since May. Asian and European markets followed the upbeat tone, supported by growing confidence in a December Fed rate cut and improved geopolitical sentiment. However, US equity futures are trading lower in early moves as markets pause to consolidate after Monday’s sharp advance. Elsewhere, oil prices slipped slightly on renewed oversupply concerns, while gold strengthened as investors sought safety ahead of key economic data. Bitcoin, meanwhile, gave back Monday’s gain and fell back below $87,500 as crypto markets lost momentum. In focus today, the US ADP employment change, US PPI ex Food & Energy, US Retail Sales, and the US consumer confidence report will help drive intraday direction for currency markets.

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In the news. The US holds Russia-Ukraine peace talks in Abu Dhabi. Ukraine debate on peace plan raises EU pressure to agree on frozen assets loan. Reeves asks banks to praise her plan as they escape the Budget tax raid. US-Canada trade talks frozen as Carney weighs DC trip next week. Alibaba's AI arm surges 34% while China commerce bounces back. French President Macron says Trump's Ukraine peace plan needs improvement. UK retailers' confidence drops to a 17-year low before the budget. Ottawa is close to a uranium deal with India worth $2.8 billion, Globe & Mail report. Hydro One partners with First Nations to invest in Ontario transmission line.

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In currency markets.The yen is firmer in early trading as markets tread cautiously near intervention-sensitive levels and respond to softer U.S. yields. The Norwegian krone is weaker at the open, pressured by softer risk sentiment and a pullback in oil prices, while the New Zealand dollar also trades lower ahead of this week’s RBNZ decision and lingering expectations of a rate cut. Overall, early FX moves reflect a mixed start driven by policy divergence and shifting commodity dynamics. CNY & Asian currencies, on average, strengthen by 0.25% against the USD. Trading currencies are mixed with NOK, NZD, AUD, & SEK falling 0.35%, CHF eased 0.2%, KWD & DKK flat, CZK & PLN gained 0.2%, and JPY & ZAR strengthened by 0.3% against the USD.

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In commodity markets. Oil prices fall 0.6%. Natural Gas prices tumbled 3.15%. Gold prices strengthened 0.8%. Silver & Copper prices rallied 1.3%. Coffee prices slipped 0.45%, while Soybean prices are flat and Wheat prices gained 0.4%.

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CAD is softer in early trading as weak crude oil prices continue to weigh on the commodity-linked currency, leaving it defensive near multi-month lows. Rising expectations of a December Fed rate cut have eased some upward pressure on USD/CAD, but the pair still holds above 1.4100 as the Loonie struggles to generate support. With key Canadian GDP data due Friday and U.S. PPI on deck today, markets are awaiting fresh catalysts before determining the next directional move for CAD.

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EURCAD is firmer as the Canadian dollar continues to weaken, pressured by softer oil prices that are keeping the Loonie on the defensive. German GDP came in as expected, providing little volatility for the euro but helping maintain the pair’s upward bias as CAD underperforms.

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EUR is steady above 1.1500, with modest gains capped below 1.1550 as traders await key U.S. Retail Sales and PPI data. The euro saw little reaction to German GDP confirming stalled growth, while the dollar remains soft following dovish comments from multiple Fed officials supporting a potential December rate cut. Overall, the pair is holding in a tight range as markets look for fresh direction from upcoming U.S. data releases.

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GBPEUR is flat as markets remain cautious ahead of tomorrow’s UK budget, keeping sterling in a holding pattern. With investors waiting for clarity on the fiscal outlook, neither currency has found a strong catalyst to drive direction in early trading.

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GBP holds steady ahead of Wednesday’s UK budget, with volatility elevated as traders seek protection against potential fiscal surprises. At the same time, dovish remarks from Federal Reserve officials — including Christopher Waller, who signalled support for a rate cut due to labour-market concerns, and John Williams, who suggested there’s room for near-term easing — have kept the US dollar soft and thereby lent support to the pound. However, uncertainty over UK Chancellor Rachel Reeves’ fiscal plans, combined with weak recent UK data and expectations of a possible December rate cut by the Bank of England, is restraining sterling’s upside.