The Morning Update

The USD holds steady, oil prices retreat, while equity markets and US yields are mixed as focus shifts to PCE & the ECB rates decision. The U.S. dollar is broadly steady after the Fed left rates unchanged. Focus now shifts to today’s U.S. GDP and PCE inflation data, followed by the ECB decision, with markets watching for guidance on further tightening into year-end. Global equity markets are mixed, with U.S. technology shares under pressure after disappointing earnings from Alphabet and other AI-linked companies revived concerns over heavy spending and returns. European shares are firmer, while investors now turn to Amazon earnings for the next major test of sentiment toward the AI trade. Elsewhere, oil prices weaken as fresh diplomatic efforts in the Middle East ease some immediate supply concerns, while gold also slips as safe-haven demand softens. Bitcoin retreats as risk appetite remains fragile following renewed weakness in technology shares. Today’s economic calendar includes U.S. preliminary Q3 GDP, PCE and Core PCE inflation, Personal Income and Spending, and Initial Jobless Claims, followed by the ECB’s interest rate decision, monetary policy statement and President Lagarde’s press conference.

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News Headline. European Central Bank President Lagarde to stand down in February. Alphabet falls 10% in premarket, putting it on course for its biggest ever post-earnings drop. Shell nearly doubles quarterly profit year-on-year. UK Healey hits banks and savers to fund modest budget handout. Canada & EU officials drop 'associate member' from joint summit declaration. TSX futures climb as oil retreat eases inflation fears; US data in focus. Merck tops quarterly estimates, hikes profit outlook as new form of Keytruda shows strength.

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In currency markets. Against the USD, MXN, AUD and NOK underperform their peers as the greenback remains relatively firm and risk sentiment softens. MXN continues to face pressure from reduced carry appeal and lingering USMCA/trade uncertainty, while AUD is weighed by softer growth expectations despite a still-firm RBA backdrop. NOK is lagging as oil prices retreat from recent highs, removing some of the support that had previously favoured the krone.

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In commodity markets. WTI -1.32% | Nat Gas +0.26% | Gold -0.33% | Silver -1.50% | Copper -1.25% | Palladium -1.36% | Coffee +0.03% | Cocoa +0.51% | Soybeans -0.57% | Wheat -0.04%

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CAD is steady after strengthening yesterday as the BoC raised rates by 25bp to 2.50% and signalled that further tightening may still be needed if energy costs feed into broader inflation. Markets now see a meaningful chance of another hike by December or January, while the Fed’s decision to hold rates has narrowed the relative policy gap and provided additional support to the loonie. Softer oil prices today are limiting follow-through, while limited progress in Canada-U.S. trade talks remains a lingering headwind.

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EURCAD slips as CAD remains supported following yesterday’s 25bp BoC hike to 2.50%, with Governor Macklem leaving the door open to further tightening if energy-driven inflation persists. The euro is softer ahead of today’s ECB decision, where rates are expected to remain unchanged but policymakers may still signal another hike in December. French bond-market stress and elevated energy costs remain additional euro headwinds, keeping the cross biased lower.

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EUR eases against the USD ahead of today’s ECB decision, with mixed euro-area sentiment data and persistent French fiscal concerns keeping the single currency under pressure. The ECB is expected to hold rates at 2.5% but may still signal further tightening later this year as elevated energy costs complicate the inflation outlook. Markets are also digesting confirmation that Christine Lagarde will leave the ECB presidency early, in February 2027, adding a new layer of uncertainty around the future policy leadership.

GBPEUR holds near 17-month highs as GBP remains supported after the UK Budget triggered a relatively calm market reaction, with gilt yields easing and fiscal credibility broadly intact. The euro remains the weaker side of the cross ahead of today’s ECB decision, with rates expected to stay unchanged but France’s debt burden and the outlook for a possible December hike still in focus.

GBP edges lower against the USD as the greenback recovers modestly and markets continue to price a high probability of another Fed hike in December. The pound is also consolidating after yesterday’s UK Budget, which delivered targeted household and business support while emphasizing fiscal discipline, leaving markets focused on the borrowing outlook and whether the package adds materially to inflation pressure. Expectations for a 25bp BoE hike next week continue to limit downside in GBP, while today’s U.S. Q3 GDP and PCE inflation data provide the next major catalyst.