The Morning Update

The USD weakens, oil prices rally, equity markets are up, and US yields ease as markets focus on rates and the US election. The USD weakened in early trading on pre-election volatility after polls indicated Harris was gaining ground in Iowa ahead of Tuesday's US election. US yields came under pressure on the combination of the prospect of a Fed 25bps easing on Thursday and as recent polls showed Harris gaining on Trump. Equity markets gained heading into a busy week of central bank activity, with markets forecasting that the Fed, Bank of England, the Swedish and Australian central banks are all likely to cut interest rates this week. Expect USD & US yields to remain volatile into the election with expectations that a Trump win could see looser fiscal policy and steep tariffs that could deepen the federal deficit and fuel inflation, undermining treasuries. Elsewhere, oil prices rallied after OPEC+ agreed to push back its December production increase by a month and Iran's escalated rhetoric against Israel. Bitcoin holds steady at $68.8k while gold and silver prices gain. This week, the US Election and the Fed & BoE interest rate decisions will dictate the direction of currency markets.

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In other news. Trump & Harris campaigns race to get the vote out on the eve of the US election. OPEC+ agrees to delay the December output hike for one month. Chinese solar firms go further afield where US tariffs don't reach. Indonesia & Russia launch first joint naval drills. The BoE expected to cut interest rates despite looser fiscal policy. Canada Post workers rally in Winnipeg with the union in a legal position to strike. Netanyahu's office is accused of leaks to thwart cease-fire talks. Spain's king & queen pelted with mud in flood-hit Valencia. LVMH's empty Chinese megastore signals a deepening luxury crash.

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In currency markets. The USD weakens, with analysts linking the fall to a poll that showed Harris taking a surprise 3-point lead in Iowa. CNY tests a three-week high as markets brace for US election volatility. Petro currencies advance after OPEC+ delayed output increases. CNY gains by 0.4%, while Asian currencies rallied by 0.65% on average against the USD. Trading currencies advanced, with NZD up 0.3%, AUD, NOK, SEK & ZAR firmed by 0.5%, and JPY, CHF & MXN strengthened by 0.8% against the USD.

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In commodity markets. Oil prices rallied by 2.35%. Natural Gas prices weakened by 0.9%. Gold prices are flat. Silver prices are up 0.6%. Copper prices firmed by 0.85%. Wheat & Soybean prices strengthened by 1.2%.

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CAD rebounds from two-year lows tested on Friday following US polls showing Harris ahead in Iowa and on the news that OPEC+ delayed output increases for a month. Without any high-tier economic releases today, we expect the loonie to hold its current range ahead of tomorrow's US election and BoC summary of deliberations on Tuesday.

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EURCAD extends gains after EU Manufacturing PMI & Sentix Investors Confidence beat expectations, offsetting OPEC+ output delay news.

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EUR extends gains through 1.0900 on a weaker USD and improved economic data. France, Germany, and the EU all posted at or better than expected results for Manufacturing PMI, as well, Sentix Investor Confidence in Nov beat expectations. Intraday, we expect markets to remain vulnerable to increased volatility heading into the US election.

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GBPEUR weakens towards multi-week lows as investors await the Bank of England interest rate decision on Thursday, with expectations growing that BoE will cut rates by 25bps.

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GBP firms in early trading, retesting 1.2950 ahead of a potentially volatile week for the pound. The pound edges higher amid the softer USD as investors brace for the US election. Beyond the budget, investors will be focused on the Fed & Bank of England, with both being forecasted to cut interest rates by 25bps on Thursday. Intraday, expect markets to be somewhat sidelined ahead of the US election.