The Morning Update

The USD weakens, oil prices ease, equity markets rise, and US yields are mixed following Democrats' midterm sweep. The U.S. dollar weakens broadly after Democrats swept both chambers of Congress, with markets expecting greater policy gridlock, slower government spending and potentially more scrutiny of the AI sector. Global equity markets are broadly higher as investors digest the Democratic sweep of Congress, with falling bond yields helping offset initial concerns around tighter AI regulation. U.S. futures and European shares gain as markets increasingly focus on the prospect of political gridlock limiting further fiscal expansion, easing some pressure on inflation and interest rates. Elsewhere, oil prices ease as markets weigh renewed diplomatic efforts around Iran and Ukraine against lingering Middle East supply risks, while gold rallies on a weaker USD and lower Treasury yields following the U.S. midterm results. Bitcoin also firms modestly as broader risk sentiment stabilizes. Today’s economic calendar includes U.S. ADP Employment Change, ISM Services PMI and Trade Balance, alongside Canadian Trade Balance and U.S. S&P Global Services PMI, with the market also assessing the results of the U.S. midterm elections.

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News Headlines. Gold, silver and precious metals jump, dollar dips as Democrats take congress. Americans deliver stunning rebuke to Trump as blue wave sweeps country. Top ICC officials urges Europe to shield court from US sanctions. The US has no immediate plan to strike Iran, Trump tells FT. Canada indigenous group expects lending boom with new projects on horizon. China confirms talks with Russia and the US on first trilateral meeting. UK rats are not high enough to curb inflation, research finds. Russia hits power stations in Ukraine's regions of Kyiv and Zhytomyr. Eurozone inflation rises to three-year high.

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In currency markets. Against the USD, MXN is the strongest performer, closely followed by NZD and ZAR, as the greenback remains under broad pressure following the Democratic sweep of Congress. MXN is benefiting from improved risk appetite and expectations that divided government could constrain further fiscal expansion and aggressive trade measures, while NZD is rebounding despite weak domestic jobs data as USD selling and position adjustment dominate. ZAR is also gaining on the softer dollar and stronger gold prices, which improve the backdrop for South African assets.

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In commodity markets. WTI -0.66% | Nat Gas +0.48% | Gold +2.93% | Silver +4.80% | Copper +0.77% | Palladium +5.99% | Coffee -1.27% | Cocoa -0.78% | Soybeans -0.89% | Wheat Flat

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CAD advances to its strongest level in roughly seven weeks against the USD as broad greenback weakness following the U.S. midterm results adds to support from the BoC’s hawkish stance. Firmer oil prices and lower U.S. yields are also helping the loonie, while improved Canada-U.S. trade rhetoric has reduced some of the political risk premium that weighed on CAD earlier in the year. Friday’s Canadian employment report remains the key domestic test, with a softer jobs print likely to temper expectations for further BoC tightening.

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EURCAD holds broadly steady near 1.57 after three consecutive sessions of gains, with strength in both currencies limiting direction. CAD remains supported by the BoC’s hawkish stance and expectations for further tightening, while the euro is benefiting from the weaker USD and expectations that Wednesday’s Eurozone inflation data could keep the ECB in play for another rate increase before year-end.

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EUR advances against the USD as the Democratic sweep of Congress drives the greenback broadly lower, with investors expecting greater political gridlock to restrain fiscal spending and U.S. Treasury yields. The euro is also receiving support from increasingly hawkish ECB rhetoric, with Bundesbank President Joachim Nagel signalling that a December rate hike will probably be necessary as policymakers remain concerned that elevated energy costs could feed into broader inflation. Attention now turns to today’s preliminary Eurozone inflation data, which will be important in determining whether expectations for further ECB tightening extend into 2027.

GBPEUR holds broadly steady as investors balance firm expectations for a 25bp BoE rate hike to 4.0% tomorrow against a euro supported by hawkish ECB rhetoric and stronger regional data. GBP continues to benefit from firmer UK inflation, recent economic resilience and expectations that the BoE will begin a new tightening cycle, although markets remain focused on whether Governor Bailey pushes back against the roughly 100bp of additional tightening currently priced over the next year.

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GBP advances to fresh seven-week highs against the USD as the greenback remains under broad pressure following the Democratic sweep of Congress and the accompanying decline in U.S. Treasury yields. The pound is also drawing support from expectations that the BoE will raise rates by 25bp to 4.0% tomorrow, although the durability of the move will depend heavily on whether policymakers signal that further tightening is likely.