The Morning Update

The USD is steady, oil prices strengthen, equity markets are up, and US yields ease as risk sentiment improves. The USD steadied heading into the Thanksgiving holiday, while the South Korean Won weakened after a surprise rate cut by its central bank, and JPY is on track for its strongest week in three months on growing expectations of a Japan rate hike. Equity markets traded higher after shares of key chip suppliers jumped on speculation that the US is reportedly considering toned-down China curbs. Tech stocks rallied the most in two weeks, while US futures ticked higher, heading into the US Thanksgiving holiday. Elsewhere, French bond yields rose amid worries that a budget standoff may topple the government. Oil prices rebounded, Bitcoin weakened nearly 2% to $94.6k, while gold & silver prices held steady. The focus will be on German inflation data and the CAD Current Account report, but with the US off for Thanksgiving, we expect markets to hold within current trading ranges.

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In other news. The US tells Ukraine to lower the conscription age to 18 to stem manpower shortage. Israel-Hezbollah ceasefire holds as thousands seek to return home. Microsoft faces a broad antitrust investigation from the US FTC. The French government is weighing concessions to avert a budget crisis. The US preps China Chip curbs that stop short of early proposals. China criticizes Trump tariff threat and says it won't solve America's problems. OPEC+ postpones output policy meeting to Dec 5th. Canada is examining tariffs on certain US items following Trump's tariff threat. Arabica coffee prices have surged to their highest level since 1977.

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In currency markets. MXN gained after President-elect Trump held talks with Mexico's president, Claudia Sheinbaum. CNY remains under pressure as investors seek further government stimulus to support economic growth. South Korean Won weakened 0.5% following the surprise rate cut today. CNY dipped 0.1%, while Asian currencies eased by 0.25% on average against the USD. Trading currencies are mixed, with JPY weakened 0.5%, CHF eased 0.2%, NOK down 0.1%, NZD & SEK flat, AUD up 0.1%, and MXN rallied 1.5% against the USD.

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In commodity markets. Oil prices strengthened by 0.8%. Natural Gas prices firmed by 0.6%. Gold prices are up by 0.3%. Silver & Copper prices are down 0.2%, while Wheat & Soybean prices are flat.

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CAD extends gains towards 1.4000 as tariff-threat shock fades as investors' confidence improves as Ottawa presses for a united front to tackle Trump's promised tariffs. We anticipate the loonie will hold within its current trading range heading into the CAD Current Account Q3 and with the absence of the US markets with the Thanksgiving holiday.

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EURCAD eases as confidence returns to the Loonie as tariff fears ease and oil prices improve.

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EUR holds steady, straddling 1.0550 heading into the German inflation report. The euro is struggling to gain upward momentum as the "Trump Trade" continues to support the USD. Domestically, Spanish inflation came in as expected at 2.4% for Nov, showing increased inflation pressures from 1.8% in October. European Economic sentiment improved to 95.8, beating expectations. The focus will be on the German inflation report, which is expected to increase to 2.6% vs 2.4% in October. The German inflation report will be the primary driver for the euro today.

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GBPEUR edges higher in early trading as investors await the German inflation report.

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GBP remains capped at 1.2700 amid quieter holiday markets. The pound holds on to weekly gains, finding support from less dovish comments from the BoE. BoE Deputy Governor Lombardelli emphasized the need for more evidence of easing price pressures before supporting further rate cuts. Lombardelli also cautioned about the risk of inflation staying above the bank's target, noting that wage growth is stabilizing at 3.5%-4% and the CPI remaining around 3% rather than 2%, which could pose significant challenges. We expect the pound to hold steady against the USD with the US holiday.

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