The Morning Update

The USD weakens, oil prices steady, equity markets are mixed, and US yields ease as markets await the Fed's preferred inflation reading. The USD fell to a one-week low against its G10 peers as investors grew cautious of tariff threats and today's critical US inflation reports. Equity markets are mixed, and US futures edged lower as markets digest the incoming Trump administration and are cautious ahead of a flurry of US economic reports for clues on the outlook for interest rates. In the Middle East, tensions eased after Israel reached a cease-fire deal in Lebanon after weeks of talks mediated by the US. Elsewhere, oil prices steadied on the Israel/Hezbollah ceasefire and caution ahead of the OPEC+ meeting on Sunday. Bitcoin rallies 2.8%, testing $93.8k, while Gold and Silver also gain in early trading. Investors will be focused on a flurry of pre-Thanksgiving holidays in the US on Thursday. Today, US GDP, US Durable Goods, Initial Jobless Claims, Core PCE-Price Index, Pending Home Sales, Personal Consumption Expenditures-Price Index, and Personal Income & Spending reports will help provide intraday direction to currency markets.

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In other news. Israel-Hizbollah ceasefire holds as thousands seek to return to homes. The Fed Minutes showed officials backed the gradual pace of rate cuts. Oil producers warn Trump tariffs on Canada will push up US petrol prices. Russia expels British diplomat over spying claims. China's EV price war set to intensify next year as BYD squeezes suppliers. VW sells its plant in the Chinese region of Xinjiang. Softbank to boost OpenAI stake with up to $1.5 bln investment. Trump tariffs could lead to 'zero economic growth in Canada'; economist. Trump camp says China is 'attacking' US with fentanyl. They aim to fight back. Foxconn says global presence to shield it from Trump tariffs. Spain's PM unveils fresh flood aid of almost 2.3 bln euros.

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In currency markets. The USD stalls at one-week lows after investors turn cautious ahead of a flurry of critical US economic releases. In November, CNY drops 1.85%, MXN drops 3.4%, and CAD drops 0.85% after threats of tariffs from the incoming Trump administration. Intraday, CNY is flat, while Asian currencies are up 0.3% on average against the USD. Trading currencies rebound, with MXN down 0.3%, AUD up 0.15%, NOK & ZAR firming 0.35%, CHF & SEK strengthening 0.5%, NZD and JPY rallying 1% against the USD.

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In commodity markets. Oil and silver prices are up by 0.2%. Natural Gas prices tumbled by 4.8%. Gold prices rally by 1%. Copper prices firmed by 0.85%. Wheat prices weakened by 0.95%, and Soybean prices gained by 0.5%.

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CAD steadies after a volatile start to the week, which saw the loonie weaken from 1.3980 to test fresh four-1/2-year highs of 1.4177 following President-Elect Trump threatening 25% levies on all products entering the US from Canada. If we saw Trump follow through on the 25% levies, economists are warning it could cause the Canadian economic growth to grind to a halt, increase the prospect of aggressive BoC easing, which could cause the CAD to weaken towards March 2020 lows of 1.4667. Intraday, the US large number of key US data releases will drive direction to the loonie.

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EURCAD extends gains as the threat of US tariffs on Canada keeps the loonie under pressure.

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EUR steadies above 1.0500 amid a softer USD ahead of US data releases. The Euro has been sidelined this week compared to its G10 peers as investors regroup after the single currency suffered its worst month selling pressure since early 2022. Month to date, the euro has fallen almost 3.5% against the USD, pressured by proposed US tariffs, escalating Russia/Ukraine conflict, and Eurozone economic weakness, all added to the euro's weakness. The focus will be on the flurry of US data releases to provide intraday direction to the euro.

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GBPEUR edges higher in early trading, with GBP up 1% in November, with the pound finding support with a less dovish BoE vs. the ECB.

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GBP holds onto base support at 1.2550, allowing the pound to retest 1.2600 amid a softer USD. The pound holds on to early gains but remains vulnerable ahead of the US core PCE inflation report, which could spark a fresh round of volatility ahead of the US Thanksgiving holiday on Thursday. Domestically, the focus will be on Friday's Bank of England's latest Financial Stability Report. Intraday, the US data releases will be the primary driver for currency markets today.