The Morning Update

The USD steadies, while oil prices edge lower, as equity markets and U.S. yields trade mixed, with investors shifting their attention to the Federal Reserve and the upcoming earnings season. The USD extended its advance to a two-month high as investors focused on the Federal Reserve’s policy outlook and the impact of the ongoing U.S. government shutdown, which has delayed key economic data. Minutes from the Fed’s September meeting showed officials acknowledging rising risks to the labour market but remaining cautious on inflation, reinforcing expectations of a 25-basis-point rate cut later this month. With markets lacking fresh data, attention now turns to Fed Chair Jerome Powell’s speech today, which could offer crucial guidance on the central bank’s next move amid growing political and fiscal uncertainty. Global equities paused their record-setting rally on Thursday as investors turned cautious ahead of the U.S. earnings season, seeking confirmation that strong corporate results can justify elevated valuations. The Stoxx Europe 600 slipped from record highs, led lower by bank stocks, while U.S. equity futures traded flat following recent gains fueled by optimism over AI-driven growth and Federal Reserve rate cuts. In Asia, shares advanced modestly, with Chinese markets rebounding after the Golden Week holiday and Japanese tech stocks firming. Analysts noted that expectations are “lofty,” and any earnings disappointment could spark volatility, though many investors still view pullbacks as buying opportunities amid resilient growth and easing inflation pressures. Elsewhere, oil prices slipped as softer demand and easing geopolitical tensions offset OPEC+ supply restraint, while Bitcoin retreated from recent highs as investors reduced risk exposure. Gold held near record levels around $4,000 an ounce, supported by safe-haven demand and expectations of further Fed rate cuts. Today’s focus will be on the ECB Monetary Policy Meeting Accounts and remarks from Fed Chair Jerome Powell, alongside a flurry of other Fed speakers, which are expected to provide key guidance on interest rate and currency market direction.

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In the news. Israel and Hamas to sign peace deal in Egypt after hostage release agreement. NATO weighs armed response to Putin's hybrid war. EU warns UK must improve NI border checks before veterinary deal is signed. Takaichi's jab at BOJ independence may face a political reality check. China tightens rare earth export controls, targets defence, and semiconductor users. Ferrari reveals Elettrica, but dials down 2030 electrification goals. Russia's industrial titans furlough workers as its war economy stalls. FAA delays flights for the third day as the government shutdown continues. China's Golden Week holiday spending falls, raising a new red flag for the economy. Lutnick dismisses any prospect of an auto deal between the US and Canada. A US bill calls for more integration between Canadian and American border agents.

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In currency markets. The USD strengthened against the Norwegian krone, pressured by softer oil prices, while the South African rand firmed on improved risk sentiment and rallying gold prices, which boosted demand for commodity-linked and emerging market currencies. The rand’s gains were further supported by investor optimism that easing global inflation and stable monetary policy in major economies could sustain capital inflows into higher-yielding assets. CNY and Asian currencies on average slip by 0.1% against the USD. Trading currencies are mixed, with SEK & NOK weakening 0.3%, KWD and PLN slipping 0.1%, JPY, NZD, and DKK flat, JPY, CHF, MXN and CZK up 0.1%, AUD gained by 0.2% and ZAR strengthened by 0.4% against the USD.

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In commodity markets. Oil, Natural Gas, and silver prices weakened by 0.65%. Gold and Soybean prices fell 0.35%. Copper prices rallied 1.8%, while Coffee fell 0.15% and Wheat prices strengthened by 0.5%.

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CAD continues in a tight trading range, straddling 1.3950, as investors await Friday’s jobs data for direction. Support from firmer oil prices was offset by weaker trade data and lingering concerns over U.S. tariffs, even as Prime Minister Mark Carney said he had a “meeting of minds” with President Trump on advancing sectoral trade talks covering steel, aluminum, and autos. The loonie remains rangebound ahead of fresh cues from both the Bank of Canada and the Federal Reserve, with markets watching Fed Chair Powell’s comments later today for signals on the U.S. rate outlook and broader risk sentiment.

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EURCAD continues under pressure, slipping toward 1.6200 as political turmoil in France continues to weigh on sentiment. The resignation of French Prime Minister Sébastien Lecornu and concerns over France’s fiscal stability have intensified bearish momentum on the euro. In contrast, the Canadian dollar has found support from relative political stability and firm commodity prices, keeping the cross under downward pressure.

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EUR is under renewed pressure ahead of today’s ECB and Fed events, despite German trade data showing a stronger-than-expected surplus last month. The stronger trade balance gives some support to the euro, but political instability in France continues to weigh heavily on sentiment. All eyes now turn to the ECB’s Monetary Policy Meeting accounts, Philip Lane’s speech later today, and Fed Chair Powell for guidance on interest rate paths.

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GBPEUR holds steady against the euro, supported by BoE policymaker Catherine Mann’s warning that inflation may remain “higher for longer.” Meanwhile, markets await the ECB’s Monetary Policy Meeting Accounts for clues on future policy, with ongoing French political risks keeping the euro on the defensive.

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GBP underperformed as the pound came under pressure amid renewed concerns over the UK’s fiscal trajectory and political constraints on spending. BoE policymaker Catherine Mann added to the cautious mood by warning that inflation could prove more persistent, reinforcing expectations that any rate cuts will be gradual. Meanwhile, the FOMC minutes signalled that the Fed remains open to further easing, setting the stage for today’s Powell speech to provide critical direction for the pair.