The Morning Update

The USD is flat, oil prices rally, equity markets are mixed, and US yields rise ahead of today's Fed interest rate-decision. The U.S. dollar is broadly flat as investors remain cautious ahead of today’s Fed decision. The central bank is expected to leave rates unchanged, with attention focused on Chair Warsh’s guidance and whether policymakers continue to signal a possible December hike amid still-elevated inflation and energy prices. Global equity markets are mixed, with U.S. futures largely flat and European shares softer while Asian technology stocks advance on strong semiconductor earnings. Investors remain cautious ahead of today’s Fed decision and results from Microsoft and Alphabet, while a renewed rise in oil prices is adding to inflation concerns and tempering the broader risk tone. Elsewhere, oil prices rally as renewed Middle East tensions revive supply concerns, while gold slips as traders position cautiously ahead of today’s Fed decision. Bitcoin firms alongside the rebound in technology shares and improved risk appetite. Today’s economic calendar focuses on the Bank of Canada’s interest rate decision, Monetary Policy Report and Governor Macklem’s press conference, followed by the Federal Reserve’s interest rate decision and Chair Warsh’s press conference.

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News Headlines. Israeli bonds and shekel fall as election leaves Netanyahu and others far short of majorities. Stellantis sees $4.5 billion cash drain amid turnaround plan to restore profit. Oil prices rise as Houthi attacks on Saudi Arabian refinery raise supply worries. Treasury yields tick higher ahead of Federal Reserve interest rate decision. European banks boost profits but fail to match Wall Street boom. China rushes to shore up markets as AI trade sours. Higher tariffs on Canadian imports would be 'catastrophic', Honda exec says. The US ambassador warns Canada could shoulder blame if midterms go against Trump.

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In currency markets. Against the USD, the New Zealand dollar was the clear outlier among G10 currencies, tumbling around 1.5% after the Reserve Bank of New Zealand unexpectedly held interest rates at 2.75%, defying widespread expectations of a hike to 3.00%. The surprise decision triggered a sharp reassessment of New Zealand’s interest rate outlook, while other major currencies were comparatively steady ahead of today’s Federal Reserve decision.

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In commodity markets. WTI +1.66% | Nat Gas +0.67% | Gold -0.19% | Silver -1.18% | Copper -0.29% | Palladium -0.92% | Coffee -1.33% | Cocoa -0.27% | Soybeans +0.36% | Wheat +0.08%

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CAD is steady in early trading ahead of today’s BoC decision, with markets still leaning toward a 25bp rate hike to 2.50% as policymakers seek to contain the risk of energy-led inflation becoming more persistent. The loonie is also finding support from a renewed rally in oil prices, while any hawkish guidance from Governor Macklem could reinforce expectations for additional tightening into early 2027. The Fed decision later today adds another layer of risk, with the relative tone of the two central banks likely to drive the next move the loonie.

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EURCAD is little changed as markets await today’s BoC decision, with a 25bp hike largely priced in and firmer oil prices continuing to support CAD. The euro remains constrained by French fiscal concerns and softer German consumer sentiment, while Thursday’s ECB meeting is expected to leave rates unchanged. Beyond the central-bank decisions, Thursday’s euro-area GDP and U.S. GDP/PCE data add further event risk for the cross.

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EUR is broadly steady against the USD as investors remain cautious ahead of today’s Fed decision and Thursday’s ECB meeting. The euro continues to face headwinds from elevated energy costs and lingering French fiscal concerns, while markets expect both central banks to hold rates. With near-term policy moves largely priced in, guidance on December tightening will be the key driver for the single currency.

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GBPEUR eases modestly from recent highs as investors remain cautious ahead of today’s UK Budget, with attention focused on the OBR forecasts, borrowing outlook and whether new measures are seen as fiscally credible. GBP is still supported by expectations for a November BoE hike, while the euro remains constrained by French fiscal concerns ahead of Thursday’s ECB decision.

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GBP eases against the USD as investors remain cautious ahead of today’s UK Budget and the Fed decision later in the session. The government’s recent autumn fiscal measures have focused on targeted cost-of-living relief, business support and maintaining fiscal discipline, but markets now want to see how the Chancellor balances those commitments with elevated borrowing costs and pressure to fund defence and public services. The BoE is still expected to raise rates in November, which is limiting the pound’s downside, while today’s Budget and OBR forecasts will be closely watched for their impact on growth, borrowing and inflation expectations.

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