The Morning Update

The USD is down, oil prices are strengthening, equity markets are up, and US yields are mixed amid rising bets on a Fed rate cut. The US dollar remains under pressure as markets ramp up expectations for a more dovish Federal Reserve, with traders now pricing a near-certain rate cut at next week’s meeting. Speculation that Kevin Hassett—widely seen as favouring lower interest rates—could replace Jerome Powell has added to the downward bias, flattening the dollar for a ninth straight session. Softer yields and the prospect of easier policy have lifted risk assets globally, while keeping the USD on the back foot across major currencies. Global equities ticked higher as investors leaned into expectations that upcoming U.S. data will reinforce the case for a Federal Reserve rate cut next week. Softer Treasury yields and continued pressure on the U.S. dollar supported risk appetite, lifting stock futures for a second straight session. With markets also pricing in a more dovish Fed outlook under a potential new chair, sentiment has stabilized after Monday’s brief bout of risk aversion. Elsewhere, oil prices rallied on renewed Ukraine-related supply concerns and lingering geopolitical tensions, raising the risk of future supply disruptions. Gold held steady as investors looked to upcoming U.S. data and remained cautious ahead of major central-bank decisions, keeping demand for safe-haven assets stable. Meanwhile, Bitcoin surged above $93,000, extending its rebound as improving risk appetite and steadier market conditions drew buyers back into crypto. In focus today, the US ADP Employment Change, ISM Services PMI and ECB President Lagarde's speech will help drive direction for currency markets.

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In the news. Russia says talks with the US on Ukraine 'useful' but no deal reached. Trump says he will nominate Fed Chair in 'early' 2026. Peter Hegseth invokes 'fog of war' as backlash grows over strikes on boats. Trafigura says China's oil demand to hit multiyear low in 2026. The EU agrees to a full ban on all Russian gas imports by 2027. Brussels pushes for 70% of critical goods to be 'made in Europe'. The AI frenzy is driving a new global supply chain crisis. Airbus cuts 2025 delivery targets after issues with top-selling jet. Bitcoin hits two-week high in cautious crypto market recovery. Toronto home sales hit a five-month low in November.

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In currency markets. NOK and SEK have firmed, supported by improving European risk sentiment and periods of broader softness in the U.S. dollar. Separately, the CNY has edged higher on signs of stronger policy support and targeted measures to stabilize the currency, with recent gains mainly driven by domestic factors. CNY and Asian currencies are up 0.1% on average against the USD. Trading currencies rebound, with NOK & SEK rallying 0.5%, PLN, DKK & CHF strengthening 0.3%, AUD & JPY gaining 0.2%, MXN, NZD, & ZAR up 0.1%, and KWD flat against the USD.

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In commodity markets. Oil prices gained 1.4%. Natural Gas prices rallied 2.2%. Gold & Soybean prices up 0.2%. Silver, Wheat and Coffee prices are flat. Copper prices strengthened 1.9%.

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CAD firmed as softer U.S. dollar sentiment and a rebound in oil provided underlying support, though gains were limited with markets focused squarely on Friday’s key employment report. Traders remain in wait-and-see mode ahead of the data and next week’s BoC meeting, which is expected to reinforce the central bank’s pause, leaving the loonie guided largely by shifts in oil prices and broader USD dynamics.

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EURCAD firmed as steady Eurozone inflation and cautious ECB commentary, including Lane’s emphasis on keeping policy unchanged unless data deviates significantly, helped underpin the euro. At the same time, markets are awaiting Canada’s jobs report, limiting CAD momentum and allowing the cross to drift higher.

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EUR traded near monthly highs around 1.1650 as expectations of Fed–ECB policy divergence and a softer dollar kept the euro supported ahead of key U.S. ADP and ISM releases. ECB Chief Economist Philip Lane said policy should remain steady unless data show a large and persistent deviation, reinforcing a patient stance. Markets also turned their attention to President Lagarde’s testimony, which added to the euro’s firm tone in early trading.

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GBPEUR is firmer as the pound benefits from improved UK sentiment, helped by upgraded growth signals and comments from Chancellor Reeves highlighting stronger-than-expected economic performance. However, the upcoming speech by ECB President Lagarde remains a key risk, as any reinforcement of a steady policy stance or concerns over euro-area inflation could support the euro and temper sterling’s advance.

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GBP rallies towards 1.3300 as growing expectations of a Fed rate cut and renewed risk appetite kept the U.S. dollar under pressure. Sterling also drew support from improved UK fiscal signals, with Chancellor Reeves highlighting stronger-than-expected growth and upgraded forecasts. Focus now turns to upcoming U.S. ADP and ISM data, which will shape near-term momentum ahead of next week’s key Fed decision.