The Morning Update

The USD and oil trade lower this morning while equities continue their move higher and treasury yields are mixed. With the election now out of the way, the market will start looking for clues as to what the Fed’s next move will be. The Fed will announce their interest rates decision later today, which is widely expected to be a 25-bps cut. Market participant will focus on the policy statement for clues as to their next move. The strength of the USD hinges on whether investors believe Trump will enact the tax cuts and tariffs. While those policies could boost growth, they risk ramping up inflation and could keep U.S. interest rates far above those of other countries.

In other news. Germany's governing coalition has collapsed after Chancellor Olaf Scholz fired a key minister and said he would call a vote of confidence in his government early next year. Europe's leaders face up to Trump victory at Hungarian summit. The fear here is that the new US administration will slow, if not stop, the flow of American military aid to Kyiv. Israeli strikes on Lebanon killed 40 people. Hezbollah chief says indirect truce talks only possible if Israel stops attacks.

In currency markets. Norway keeps interest rate at 16-year high, says restrictive policy needed. China's yuan recovers from 3-month low on export data and state bank support. The JPY drops to a 3-month low prompting fresh warning from Japan’s top FX diplomat. The INR hit record lows against the USD. The ZAR bounces from a four-month low against dollar (up 0.72%). The MXN recovers (up 0.17%)  after touching a 2-year low. AUD and NZD paired some of yesterday’s loss rallying 0.94% and 0.81% respectively.

In commodity markets. Oil slipped, extending a sell-off triggered by the U.S. presidential election, as a strong dollar and lower crude imports from China offsets the output cuts caused by Hurricane Rafael. Gold bounces (up 0.1%) off a 3-week low as traders brace for Fed rate decision while silver remains steady. In the agricultural market, China’s October soybean imports surged 56% over 2023 as buyers are rushing to stockpile ahead of Trump’s inauguration. Some Chinese importers are reluctant to purchase soybean from the US with a January delivery given the threat of tariffs.  

Current level USD Index                           104.885             Down 0.19%

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The USD/CAD soften after reaching a recent high as US treasury yield move lower and oil prices stabilizes. All eyes on the Fed's rate decision later today.

Current level USDCAD                              1.3892                 Down 0.33%

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The EURCAD bounced back after hitting a 4-month low yesterday. While we expect to see continued volatility in the currency pair it remains in the 1.4900-1.5100 range.

Current level EURCAD                               1.4940                 Down 0.07%

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The EUR/USD recovers from yesterday’s move ahead of the Fed’s interest rate decision. Trump’s victory couple with the German coalition dissolving is keeping a lid on the EUR.

Current level EURUSD                               1.0759                 Up 0.30%

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The GBP/EUR remains strong in early trading as market participants await the BoE’s interest rate decision which is expected to be reduced by 25-bps.

Current level GBPEUR               1.1993 (.8338)                    Up 0.08%  

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The GBP/USD followed other currencies as it rebounded from yesterday’s lows. Investors now awaits the Boe and the Fed’s interest rate decision and following comments to find clues as to the Central Bank’s next move.

Current level GBPUSD                               1.2903                 Up 0.19%

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