The Morning Update

The USD strengthens, oil prices rally, equity markets are mixed, and US yields rise geopolitical concerns and tariff threats. The USD rebounds after last weeks first weekly fall since September, while the Euro weakens as concerns of a French government collapse grows. The USD got a boost in early trading after President-elect Trump put BRIC nations on notice, threatening 100% tariffs if they pursue creating a new currency. Asian equities gained on signs of economic stabilization in China, while in Europe the French & UK equity markets fell. Oil prices rally on upbeat China data, uncertain Israel-Lebanon ceasefire, and escalating tensions in Syria. In China, Global Manufacturing PMI rose at its fastest pace since Feb 2023. In Europe, France's far right say it will vote the government down unless PM Barmier yields to their demands on the budget. Elsewhere, Bitcoin weakens 2.1%, falling to $95k, while Gold & Silver both weak over 0.8% in early trading. In focus this week; Monday, US ISM Manufacturing PMI. Tuesday, CHF CPI, US Jolts Report, and CNY Caixin Services PMI. Wednesday, UK BoE Governor Bailey Speech, US ADP Employment Change, US ISM Services PMI, & ECB President Lagarde Speech. Thursday, CAD Ivey PMI. Friday, EUR GDP, CAD Net Employment Change, CAD Unemployment Rate, US Average hourly Earnings, US Nonfarm Payrolls & Michigan Consumer Sentiment Index will help provide direction to markets this week.

‍

In other news. Trump threatens 100% tariff on BRICS countries if they pursue creating a new currency. Russian & Syrian warplanes seek to blunt rebel advance from Aleppo. France's far right says it will vote government down unless 'last minute miracle.' Eurozone Nov factory activity fell sharply, outlook gloomy PMI shows. Romanian leftist win parliamentary election amid uncertainty over presidency. Latest US strike on China's chips hits semiconductor toolmakers. IDF strikes Hezbollah amid truce violations; France said accusing Israel of transgressions. UK house prices jump 3.7% in November, its fastest growth since November 2022. Canada Post presents union with 'framework' to reach deal as strike continues.

‍

In currency markets. Euro weakens against the USD as French politics weigh on the single currency. GBP tests fresh 2 1/2 year highs against the Euro. CNY yuan tests a 4-month low on tariff threats and mixed PMI data. CNY & Asian currencies weakened 0.5% on average against the USD. Trading currencies come under fresh selling pressure, with ZAR, NOK & SEK tumbling 0.65%, CHF weakening 0.5%, MXN, JPY & AUD falling, 0.3%, NZD down 0.15% against the USD.

‍

In commodity markets. Oil prices rallied by 0.9%. Gold falling 0.9%. Silver prices tumbling 1.3%. Copper prices easing 0.25%. Wheat prices dropping 0.5% and Soybean prices are flat.

‍

CAD ends November with its third monthly decline against the USD, and starts December on a weaker note despite strengthening oil prices as US tariff concerns continue to overshadow the loonie. Domestically, investors will be focused on Friday's CAD unemployment report to help set the stage for the December 11th CAD Interest Rate Decision. Intraday, markets will be focused on the US ISM Manufacturing PMI and CAD S&P Global Manufacturing PMI to provide intraday direction to currency to the Loonie.

‍

EURCAD weakens in early trading as ongoing political uncertainty in France adds selling pressure to the Euro.

‍

EUR weakens towards 1.0500 on political uncertainty and a dovish ECB. The combination of Trump's warning to the BRICS nations with tariffs, the prospect of a no-confidence vote in France against PM Barmier, and an increasingly more dovish ECB is pressuring the Euro against its G10 peers. Domestically, Italy, France & German Manufacturing PMI came in below expectations, and EU Unemployment rate held static at 6.3%. Intraday, France political updates and US Manufacturing PMI will be the primary driver's for the Euro.

‍

GBPEUR rallies to a fresh 2-1/2 year high as the euro comes under fresh selling pressure from political uncertainty in France and expectations of widening interest rate differentials between the BoE & ECB. Markets are predicting UK rates may drop 75bps in 2025, while the ECB is expected to cut 1.5% in 2025.

‍

GBP steadies above 1.2700, but upside is capped against a strengthening USD. Slips in early trading against the rallying USD, supported on tariff threats against BRIC nations. The pound is finding some underlying support with its high domestic interest rates, and limited risk exposure to Trump tariffs, with investors focused on December 5th BoE interest rate decision. Intraday, the US data release will be the primary driver for the pound.