The Morning Update

The USD firmed, oil prices are flat, while equity markets and US yields are mixed ahead of the Fed and BoC rate decisions. The U.S. dollar strengthened from a one-week low as optimism grew that Washington and Beijing are close to finalizing a trade deal that would pause additional tariffs and China’s rare-earth export curbs. President Trump’s upbeat remarks on securing a “great deal” with President Xi lifted sentiment. At the same time, traders also looked ahead to the Federal Reserve’s policy decision, with a 25-basis-point rate cut widely expected. Meanwhile, the Canadian dollar held steady, pivoting 1.3950 ahead of the Bank of Canada interest rate decision. Global equity markets traded mixed as investors weighed strong tech-driven optimism against caution ahead of the Federal Reserve’s rate decision. Gains in U.S. and Asian stocks, led by AI enthusiasm and upbeat earnings from major tech firms, were offset by softer sentiment in Europe. Expectations of a 25-basis-point Fed cut and potential hints at the end of quantitative tightening kept risk appetite in check. Elsewhere, oil prices recouped losses as skepticism over the impact of new Western sanctions on Russia and speculation of an OPEC+ output increase pressured the market. Gold hovered just below $4,000 amid fading safe-haven demand, while Bitcoin weakened below $113,000 amid improving risk appetite. Today's focus will be on the Federal Reserve and the Bank of Canada's interest rate decisions, followed later in the evening by the Bank of Japan's interest rate decision.

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In the news. Trump says he will cut the tariffs on fentanyl imports from China. The EU is pressing to back critical minerals projects amid China's tightening grip. NVIDIA's supplier has already sold next year's chips on the AI boom. NVIDIA shares pop 3% in premarket as tech giant nears historic $5 trillion valuation. Hurricane Melissa makes landfall in Cuba. Canada rebuilds Asia trade ties to counter Trump tariff pain. Lufthansa looks to shed its reputation as Europe's airline laggard. The US strikes $80 billion deal for new nuclear power. Big oil earnings expected to edge up as analysts eye 2026 outlook. The Bank of Canada is expected to cut ahead of Carney's budget.

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In currency markets. Australian dollar gained after hotter-than-expected inflation data dampened prospects for near-term rate cuts by the Reserve Bank of Australia. The INR stabilizes as likely central bank intervention counters importer dollar bids, and Thailand has not manipulated the THB, the finance minister said. CNY is flat, while Asian currencies slip 0.1% on average against the USD. Trading currencies are mixed, with CHF weakening 0.45%, JPY, PLN & NOK dropping 0.3%, DKK & CZK easing 0.2%, MXN, KWD, NZD, & SEK flat, while ZAR & AUD gained 0.3% against the USD.

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In commodity markets. Oil and Coffee prices are flat. Natural Gas prices tumbled 1.9%. Gold prices strengthened by 1.4%. Silver prices rallied 2.1%. Copper prices firmed 0.75%. Wheat prices are up 0.3%, while Soybean prices fell 0.3%.

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CAD holds steady, pivoting 1.3950 as markets balance expectations of a Bank of Canada rate cut with ongoing concerns about trade tensions and fiscal policy. The BoC has signalled that while government spending in the upcoming period will continue to pressure Canadian exports and sentiment. The central bank’s dovish tone, combined with signs of a softening labour market, has kept the Canadian dollar under strain despite modest support from oil prices. Meanwhile, the Federal Reserve’s expected rate cut has steadied the U.S. dollar, limiting downside in USD/CAD even as global risk appetite improves. Traders are watching closely for policy guidance from both central banks, as diverging fiscal and monetary paths could determine the pair’s next move.

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EURCAD slipped in early trading as investors grew cautious ahead of tomorrow’s key euro-area GDP data and weighed the potential impact of today's Bank of Canada rate decision. With the BoC expected to signal further easing, the CAD remains under pressure, yet reduced appetite for the euro ahead of the GDP print is capping gains. The mix of a potentially weaker EUR due to soft EU growth and a CAD under threat from dovish BoC commentary is keeping the pair subdued for now.

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EUR slips in early trading, as investors position cautiously ahead of the Federal Reserve’s policy decision later today. The pair retreated from recent highs near 1.1670, pressured by a modest U.S. dollar rebound as traders trimmed short positions. Markets widely expect the Fed to cut rates by 25 basis points, but attention will focus on Chair Jerome Powell’s tone for hints of further easing in December. A dovish message could renew dollar weakness, while a more cautious stance might reinforce downside pressure on the euro. In Europe, softer Spanish GDP and retail data have added to concerns about slowing regional growth ahead of broader Eurozone GDP figures and Thursday’s ECB policy announcement. For now, EUR/USD remains range-bound, with sentiment hinging on central bank signals from both sides of the Atlantic.

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GBPEUR weakened as concerns over the UK’s widening fiscal deficit and downgraded productivity outlook weighed on sentiment. Softer UK inflation and retail data have reinforced expectations of further Bank of England policy easing, adding pressure on sterling. Meanwhile, the euro found support from relatively stronger eurozone data and diverging monetary policy expectations, pushing GBP/EUR lower.

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GBP extended its decline toward 1.3200 as renewed expectations of a Bank of England rate cut and a firmer U.S. dollar weighed on the pair. Sterling remained under pressure after reports suggested the UK Office for Budget Responsibility will lower productivity forecasts, widening the fiscal gap and reinforcing the case for policy easing. Softer UK shop price data, showing the largest monthly food price drop since 2020, further supported the dovish outlook. Meanwhile, traders are positioning cautiously ahead of the Federal Reserve’s policy decision, where a 25-basis-point rate cut is expected, along with potential guidance on additional easing in December. With risk sentiment subdued and the technical setup turning bearish, GBP/USD remains vulnerable to deeper losses if the Fed maintains a less dovish tone than anticipated.