The Morning Update

The USD firms, oil prices are up, equity markets are down, and US yields rise as risk sentiment wanes. The USD tests a fresh 4-month peak, while Bitcoin is approaching $90k, benefiting from the incoming Trump administration. Equity markets stalled amid signs of easing risk sentiment and as caution mounts as investors weigh the potential impact of Donald Trump's cabinet picks. "There are question marks around another round of Trump tariffs, the deficit and upward pressure on the dollar, forcing the Fed to slow the pace of easing." Said Wool, head of portfolio management at Rayliant Global Advisors. Investors will be focused on Wednesday's US core consumer price index to help provide direction for the Fed's next steps on their interest rate policy. Elsewhere, oil prices hold on to their gains ahead of the OPEC report, Bitcoin firms to $87,381, while gold prices weaken. Today sees a light economic docket, so investors will be focused on Fed's Barkin, Harker & Waller's speeches to help provide intraday guidance to currency markets.

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In other news. Trump is expected to nominate China hawk Rubio for secretary of state. Israeli airstrikes hit Beirut suburbs. More ECB rate cuts are coming, but the pace of easing is uncertain. The UK regular pay grows at its slowest pace in two years, pointing to lower inflation. Shell wins appeal against landmark Dutch climate ruling. AstraZeneca lifts 2024 outlook after Q3 beat, doubles down on US investments. COP29 Azerbaijan: World leaders gather to discuss climate finance. Bejing pushes to join security efforts for citizens in Pakistan, sources say. Garmany is set for the Feb 23rd election. North Korea ratifies mutual defense treaty with Russia. India's inflation rose to 6.21% annually in October vs the forecasted 5.81%.

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In currency markets. The GBP drops to a fresh 3-month low on slower jobs data. The USD extends gains against its G10 peers, testing four-month highs on the increasing prospect of tariffs with the incoming Trump presidency. CNY eases 0.35%, while Asian currencies weaken by 0.45% on average against the USD. Trading currencies come under pressure, with ZAR tumbling 0.95%, AUD, MXN & SEK weakening 0.6%, NZD & NOK falling 0.4%, and JPY & CHF easing 0.25% against the USD.

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In commodity markets. Oil prices firm by 0.6%. Natural Gas prices firm by 0.2%. Gold, Silver & Soybean prices weakened by 0.75%. Copper prices tumbled by 1.9%, and Wheat prices eased by 0.25%.

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CAD tests a fresh multi-year low, hitting 1.3967 in early trading as the USD extends gains as risk sentiment wanes with the uncertainty of fresh tariffs and USMCA trade agreement uncertainty. We expect the CAD to remain under pressure, with the potential of retesting May 2020 lows, where the loonie weakened through 1.4000 to test lows of 1.4560. Intraday, we expect the loonie to remain within its current trading range without any high-tier economic data releases.

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EURCAD tests fresh multi-month lows, down 2.22% in November as the loonie finds support from higher oil prices and weaker-than-expected German sentiment data.

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EUR weakens towards 1.0600 on German data and tariff concerns. The euro continues under pressure, falling from 1.0900 following the Trump election victory as the likelihood of tariffs, coupled with the increasing prospect of further ECB rate cuts. The Euro continues under pressure, falling nearly 2.5% in November as the USD continues to strengthen on the prospect that Trump's protectionist policies could boost US inflation levels. Intraday, the series of Fed speakers will be monitored closely on their outlook on US rate policy.

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GBPEUR holds steady near a multi-year high, with the pound rallying almost 2% against the single currency in November.

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GBP continues on the back foot, straddling 1.2800 ahead of a flurry of Fed speakers today. The pound holds near three-month lows, under pressure from a surging USD following the Trump US election victory. The GBP came under further pressure after UK employment levels cooled to 219k from 373k, taking the unemployment rate to 4.3% from 4%. Intraday, US Fed speakers will help provide direction ahead of tomorrow's crucial US inflation report.