The Morning Update

The USD slips, oil prices edge higher, equity markets are down, and US yields are mixed ahead of today's Fed rate decision. The U.S. dollar is slipping ahead of the Fed’s interest rate decision as investors grow cautious and avoid large positions before the policy announcement. Markets widely expect a rate cut, keeping the greenback under mild pressure while attention shifts to the Fed’s guidance on the pace of easing in 2026. With sentiment fragile, the dollar’s near-term direction will hinge on whether the Fed delivers a dovish signal or tempers expectations for further cuts. Global equity markets are softer as investors adopt a cautious stance ahead of the Fed’s rate decision, with traders focusing on updated 2026 guidance. U.S. futures and Europe’s Stoxx 600 slipped, while Asian markets were mixed as the recent rally lost momentum. With bond yields rising and uncertainty around the Fed’s tone, risk appetite remains subdued. Elsewhere, oil prices edged higher on renewed supply concerns, while gold softened as investors turned cautious ahead of the Fed decision. Bitcoin weakened below $92,500, reflecting reduced risk appetite across markets. Today's focus will be on the Fed and the BoE interest rate decisions, which will be the primary drivers of currency markets.

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In the news. Warner Bros. bidders brace for a fight that will last months. Canada's US envoy to step down; Mark Wiseman seen as likely successor. Stock futures dip as traders eye 2026 Fed outlook. Traders now see the ECB hiking rates in 2026 as hawkish bets grow. Trump gives Zelensky 'days' to respond to peace proposal. The EU races to bypass Orban on Russian assets before the summit. Germany sees high hurdles to winning ECB presidency. Russia's oil industry could suffer long-term damage from Ukrainian drone attacks. US businesses accuse some Canadian companies of cheating on Trade. Australia begins enforcing world-first teen social media ban.

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In currency markets. The South African rand is strengthening as improving risk sentiment and steady commodity support draw investors back into higher-yielding emerging-market currencies. The Japanese yen has also firmed after a three-day losing streak, supported by expectations that the Bank of Japan will hike rates next week, helping stabilize the currency after recent volatility. CNY & Asian currencies, on average, are flat against the USD. Trading currencies improve, with CZK, NOK, JPY, PLN, & DKK flat, CHF, KWD, AUD & NZD up 0.1%. SEK firms 0.2%, and ZAR strengthens 0.4% against the USD.

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In commodity markets. Oil prices firmed 0.5%. Natural Gas prices tumbled 1.2%. Gold, Coffee, Soybean, and Wheat prices eased 0.35%. Silver prices strengthened 1.2%, and Copper prices rallied 1.5%.

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CAD is steady around 1.3850 as investors await today’s Bank of Canada and Federal Reserve policy decisions, keeping trading activity subdued after the loonie recently touched an 11-week high. Resilient domestic data and expectations for the BoC to hold rates firmly at 2.25% continue to underpin sentiment, while markets also price in a more hawkish shift in 2026. With a Fed rate cut likely later in the day, USD/CAD remains range-bound as traders look for clearer policy signals from both central banks.

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EURCAD is edging higher as the euro continues to draw support from hawkish ECB signals, in contrast to expectations for a steady Bank of Canada decision later today. While resilient Canadian data has kept the loonie broadly supported, the BoC’s wait-and-see stance and lack of near-term tightening prospects leave EUR/CAD biased modestly upward. With both central banks set to provide fresh guidance, traders are positioning cautiously, but near-term momentum favours the euro.

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EUR is holding a bid tone near 1.1650 as traders remain cautious ahead of the Fed’s rate decision, where a 25 bps cut is almost entirely priced in. Hawkish-leaning ECB commentary continues to provide support for the euro, helping offset a mild recovery in the US dollar and rising Treasury yields. With both central bank meetings and incoming US labour data in focus, the pair is likely to stay range-bound until the Fed’s guidance offers clearer direction.

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GBPEUR is steady as markets await today’s Fed decision, which is expected to set the tone for global currency moves. The euro is supported by resilient Eurozone fundamentals and increasingly hawkish ECB rhetoric, while the pound remains capped by expectations that the BoE will begin easing in early 2026. With both currencies facing contrasting central-bank outlooks, the emerging policy divergence suggests GBP could come under pressure against the euro into 2026.

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GBP is holding gains above 1.3300 as renewed U.S. dollar softness and firm expectations for a Fed rate cut keep the pair supported ahead of today’s decision. While near-term momentum favours the pound, investors remain cautious, with a “hawkish cut” from the Fed potentially limiting further upside. Expectations for the Bank of England to begin easing in early 2026 continue to weigh on the currency’s broader outlook, especially as softer UK inflation and cooling labour data reinforce the case for gradual policy loosening.