The Morning Update

The USD is steady, oil prices weaken, equity markets are mixed, and US yields ease in subdued month-end trading. The USD snapped a two-month rally, with the greenback having its worst week since August as the "Trump Trade" stalls. Chinese equities are higher on stimulus hopes, European equities are mixed, while US futures are up on speculation that US president-elect Trump will temper his more extreme trade policies. Trump's pick for Treasury Secretary, Scott Bessent, signaled to markets that they may take a more pragmatic approach to tariffs. Elsewhere, oil prices eased ahead of the OPEC+ meeting on Dec 5th, while Bitcoin advanced by 2% to $96.8k, and gold is up for a fourth trading session but remains on track for its first monthly drop since August. Without any US economic data releases today, we expect markets to remain within current trading ranges.

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In other news. Canada to strengthen border after Trump tariff threat. Buy American to avoid Trump trade war, Says ECB President Lagarde (FT). Lebanon alleges ceasefire violations on Israel strikes persist. Ukraine imposes first wartime tax hikes to fight Russian invasion. India's economy expands by just 5.4% in Q3, well below expectations. The European Union's harmonized index of consumer prices rose to 2.3% in November, up from 2% in October. Volkswagen India unit faces $1.4 billion tax evasion notice. Biden says he hopes Trump rethinks tariffs on Mexico and Canada.

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In currency markets. The JPY tests a six-week high on growing expectations of a Bank of Japan rate hike. Chinese Yuan snapped a two-month losing streak, and G10 currencies improved on a softer USD. CNY is flat, while Asian currencies firmed by 0.15% on average against the USD. Trading currencies are mixed, with NOK weakening 0.3%, MXN down 0.15%, AUD flat, ZAR up 0.15%, NZD & CHF firmed by 0.3%, and JPY rallying 1.1% against the USD.

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In commodity markets. Oil is down 0.35%. Natural Gas prices rallied by 3.4%. Gold prices firmed by 0.8%. Silver prices strengthened by 2%. Copper prices gained by 0.5%, while Wheat & Soybean prices are flat.

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CAD steadies near 1.4000 as the knee-jerk reaction to the threats of tariffs eased, and Canada's Federal and Provincial leaders agreed to work in a coordinated way against the tariff threat. Investors will be focused on the CAD Gross Domestic Product Annualized (Q3), which is expected to drop to 1% from 2.1% previously. Today's GDP report will be monitored closely for clues on the pace of further BoC interest rate decision at their meeting in December.

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‍EURCAD holds steady in quiet post-US Thanksgiving holiday markets.

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EUR continues to straddle 1.0550 after the EU inflation report. The euro trades within a tight range in quiet month-end trading markets. Domestically, the Eurozone annual HICP inflation levels rose as forecasted to 2.3% in November, up from 2% in October. ECB Villeroy suggested that the ECB should include negative rates in its toolkit as "victory against inflation is in sight." Money markets expect the ECB will cut interest rates by 25bps at its December meeting. Intraday, without US economic data releases, markets are expected to remain sidelined, with many US traders expected to take an extended US Thanksgiving holiday.

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GBPEUR holds steady, up 1.4% in November, with the pound finding support from expectations the BoE will keep rates on hold in December.

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GBP retreats from multi-week highs towards 1.2750 on month-end trading. The pound slipped in early trading but looks set to break an eight-week losing streak against the US. Expectations that the BoE will keep interest rates on hold in December, while the Fed is expected to cut by 25BPS, coupled with the fading "Trump Trade," is helping to provide underlying support for the pound. Intraday, we expect the pound to steady within the current trading range in quieter than normal month-end trading markets.

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