The Morning Update

The USD eased, oil prices steady, equity markets are mixed, and US yields rose ahead of the ECB & US inflation report. The USD and EUR are sidelined ahead of the ECB interest rate decision and the US PPI report, while CHF dipped after the Swiss National Bank eased interest rates by 50 bps this morning. US futures eased after the Nasdaq notched up a record close above 20,000. European equity markets are mixed ahead of the ECB interest rate decision. The ECB is expected to lower its policy rate for the fourth time, but unlike the SNB & BoC, the ECB is only anticipated to cut by 25 bps today. Elsewhere, oil prices are steady as demand weakness is offset by sanctions-driven supply risks. Bitcoin fell by 0.8% but holds above $100k, while gold and silver prices both eased. Investors will be focused on the ECB interest rate decision, the US initial Jobless Claims, and the US PPI report to help provide intraday direction to currency markets.

‍

In other news. India's inflation slows from a 14-month high, raising hopes of an interest rate cut under the new RBI governor. Nvidia steps up hiring in China to focus on AI-driven cars. NATO's European members discuss a 3% target for defense spending. Romania & Bulgaria to join EU's Schengen free movement area. South Korean President Yoon vows to 'fight to the end.' defying impeachment threat. Israel & Palestinians explore Gaza truce with US envoy on shuttle mission. IEA expects to comfortably supply the oil market in 2025 despite a demand hike. Premier Doug Ford threatens energy cuts to the US over Trump tariff threats.

‍

In currency markets. Currency markets are steady ahead of the US PPI report and the ECB Interest rate decision. South Korean Won remains under pressure with the ongoing political uncertainty, and AUD strengthens on strong jobs data. CNY slips by 0.1%, while Asian currencies are flat on average against the USD. Trading currencies improve, with CHF weakening by 0.25%, SEK & MXN flat, JPY up 0.1%, NZD & ZAR firming 0.2%, NOK gaining 0.35%, AUD Strengthening by 0.5% against the USD.

‍

In commodity markets. Oil, Wheat & Soybean prices are flat. Natural Gas, Gold & Silver prices eased by 0.5%, while copper prices firmed by 0.5%.

‍

CAD continues to straddle around 1.4150, firming slightly in early trading as markets remain sidelined ahead of the US PPI & Jobs data. On Wednesday, the BoC delivered another 50bps rate cut to 3.25% but signaled that future easing would slow and warned that Trump's tariffs would 'dramatically' hit growth. Markets are now pricing in a 60% chance of a 25bps rate cut in January. Our bias remains to buy USD on dips as we see more room for CAD weakness into January.

‍

EURCAD is steady as investors are sidelined ahead of the ECB interest rate decision and EBC President Lagarde's statement.

‍

EUR holds on to early gains, clinging to 1.0500 ahead of the ECB interest rate decision. Investors are sidelined heading into the ECB policy announcements and the following ECB President Lagarde's press conference. The ECB is widely expected to cut by 25 bps, but if the ECB opts for a 50 bps cut, we would expect the euro to weaken quickly through 1.0400. The focus will be on Lagarde's comments if they are perceived as bearish, this would add pressure to the euro.

‍

GBPEUR holds steady near 8-year highs as markets await the ECB policy announcement and statement.

‍

GBP retests 1.2750 as risk sentiment wanes. Investors turned cautious ahead of the ECB policy announcement and next week's Fed & BoE announcements. The pound remains resilient compared to its G10 peers on expectations that the BoE will keep interest rates on hold at next week's policy announcement. The focus will be on the US Producer Price Index for November and the US initial Jobless Claims. Economists expect the initial jobless claims to decline to 220k from 224k, which will be neutral for the GBPUSD.

‍