The Morning Update

The USD strengthens, oil prices gain, equity markets are mixed and US yields ease on geopolitical and economic concerns. The USD rallies, while the euro falls to two-year lows, the GBP slipped to six-month lows after weak economic data out of the EU and UK. The Russian rouble weakened after President Putin said Russia had struck a Ukrainian military facility with a new medium-range, hypersonic ballistic missile. European equity markets pared initial gains after the EU business activity unexpectedly shrank across the eurozone's major economies. Markets expect the chance of a 50 bps rate cut by the ECB in December rose to 50% from 15%, as economic worries continue to grow. Elsewhere, Bitcoin set a fresh-high, moving closer to $100k, as bets on President-elect Trump's support for crypto and a looser regulatory environment will help the industry. Oil prices gain as tensions in Ukraine grow, and Gold & Silver prices both rally in early trading. In focus today, the US Composite, Sales & Manufacturing PMI reports, US Retail Sales , Michigan Consumer Sentiment Index, UoM 5-year Consumer Inflation Expectation, CAD Retail Sales, and speeches from BoE Greene, ECB Schnabel will help provide intraday direction to currency markets.

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In other news. NATO & Ukraine to hold emergency talks on Russian ballistic missile attack. Trump's tariff plan would put US on path to 'crony capitalism', Griffin says. ICC issues arrest warrant for Israeli PM Netanyahu. Poland urges the EU to spend more on eastern defenses ahead of Trump's return. Eurozone business activity falls sharply in November. Record 2025 bond sales risk higher eurozone borrowing costs. Germany's Scholz set to run for a second term after potential rival bows out. Liberals plan to give $250 cheques to millions of Canadians, cut GST over the holidays. UK activity drops to its lowest in a year a business gives 'thumbs down' on Budget.

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In currency markets. The USD rallied, supported by soft Eurozone PMI data which took the Euro to a two year low, and the pound also weakened on weaker-than-expected Retail Sales data. CNY slipped by 0.1%, while Asian currencies were flat on average against the USD. Trading currencies were mixed with, NZD & SEK weakening 0.3%, AUD, NOK, MXN & CHF down 0.2%, and JPY & ZAR up 0.15% against the USD.

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In commodity markets. Oil prices up 0.4%. Natural Gas, Gold & Silver prices rallied by 1.35%. Copper prices tumbled by 1.1%. Wheat prices slipped by 0.2% and Soybean prices are flat.

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CAD eases in early trading edging off a 9-day high of 1.3928 back towards 1.4000 as markets await crucial US PMI and CAD Retails Sales reports today. The Liberal's proposed new spending measures could translate into a noticeable boost to (GDP) growth in Q1/24, which may cause the BoC to pause a 50 bps rate cut in December. Investors will be focused on today's Retail Sales ex Auto's which is expected at 0.5%, up from -0.7% in September. Intraday, CAD Retail Sales & US PMI will be the primary drivers for the loonie today.

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EURCAD continues on its downward trend, testing another fresh 7-month low following disappointing eurozone growth & PMI data, while CAD found support from firming oil prices and the proposed CAD Liberals spending plan in December.

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EUR tumbles to a fresh two-year low after weak eurozone PMI results. The euro  briefly tested 1.0333 after the German and Eurozone showed that business activity in the private sector contracted in early December. Elsewhere, German Gross Domestic Product y/y Q3 weakened to -0.3%, below expectations of -0.2% and is on track to be the worst performing G7 country in 2024. Adding further pressure to the euro, markets have raised their expectations of the ECB for a 50 bps rate cut in December. Intraday, the US PMI will help drive direction for the single currency today.

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GBPEUR holds steady as both the Eurozone and UK economic data releases disappointed markets, with investors favoring the USD.

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GBP weakens towards 1.2500 after weak UK data. The pound tumbled to a fresh six-month low against the USD after data showed British business output in November contracted for the first time in more than a year, and retail sales also fell to 2.4% in October vs 3.2% in September. Investors remain cautious that if future economic weakness continues, the Bank of England may be forced to cut rates more dramatically than investors had expected. Intraday, US PMI reports will help provide direction to the pound.