The Morning Update

The USD strengthens, oil prices are flat, equity markets are up, and US yields rise on earnings news and rate hopes. The USD extends gains for a fifth straight day, testing fresh one-year gains on "Trump Trade" momentum. Equity markets were lifted by the bullish outlook from ASML Holdings, as well as expectations of ECB and Fed rate cuts in December. Wednesday's US CPI report fueled hopes of a potential Fed rate cut in December, but concerns are growing that President-elect Trump's policies on tax and tariffs will reignite price growth in 2025. Elsewhere, higher oil prices reversed on a stronger USD and weak demand growth expectations. Bitcoin strengthened above $91k, while gold & silver prices both weakened in early trading. Investors will be focused on the US PPI ex-food, Initial Jobless Claims, and later in the afternoon, comments from Fed Chair Powell & BoE Governor Bailey will help provide intraday direction to currency markets.

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In other news. President-elect Trump secures control of Congress as Republicans win the House majority. French boycott of COP29 lays bare widening divides at the UN climate summit. Ukraine's bonds jump as investors bet Trump will end the war. Israel behind forced population transfer in Gaza, Human Rights Watch says. Britain eyes pension 'mega-funds' to super-charge its economy. ASML maintains a bullish 2030 outlook on AI-driven demand. Labor minister pushes for 'deal at the table' after Canada Post union issues strike notice.

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In currency markets. The USD index extends its rally to a fresh 1-year high, while Asian & G10 currencies remain under selling pressure. CNY falls by 0.3%, while Asian currencies weaken by 0.4% on average against the USD. Trading currencies remain under pressure, with ZAR tumbling 0.9%, MXN & SEK weakened by 0.65%, CHF dropped 0.5%, and NOK, JPY, NZD & AUD eased by 0.4% against the USD.

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In commodity markets. Oil prices are flat. Natural Gas & Gold prices eased by 1.3%. Silver prices tumbled by 2.4%. Copper prices weakened by 1.8%. Wheat prices dropped by 0.4%, and Soybean prices firmed by 0.3%.

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CAD continues under selling pressure, extending its losses to levels not seen since 2020 as the USD continues to advance on the "Trump Trade." We anticipate the USD will maintain its momentum with the prospect of potential new tariffs in 2025, causing a widening divergence in economic growth and interest rates. Intraday, the US PPI report and comments from Fed Chair Powell will help provide direction to the loonie today.

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EURCAD tumbles to a fresh five-month low as expectations grow for an ECB rate cut in December, while the loonie finds underlying support from oil prices.

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EUR weakens to a fresh 2024 low, testing 1.0500 ahead of Fed Chair Powell's comments. Euro continues on the back foot on fears of trade tariffs from the US administration next year, alongside expectations that the ECB will take a more aggressive stance at lowering interest rates in December and into 2025. Domestically, EU employment levels held steady, and eurozone GDP came in at expectations, helping to provide an underlying support for the euro. Intraday, US PPI, and Fed Powell's comments will be the primary driver for the single currency today.

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GBPEUR holds steady as both currencies remain under equal pressure against the USD.

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GBP weakens to fresh four-month lows ahead of BoE Governor & Fed Chair comments. The pound continues under pressure from a combination of the "Trump Trade," an increasingly more dovish BoE, and stagnating domestic growth concerns. Investors will be monitoring comments from BoE Governor Bailey today and are expecting him to stick to his cautious stance on policy. We anticipate the pound to remain under pressure heading into the US PPI report and BoE & Fed comments.