The Morning Update

The USD is down, oil prices are steady, equity markets are mixed, and US yields are rising amid a cautious economic outlook. The USD extends its decline in thin, Black Friday trading as investors bet that US interest rates have peaked. Oil prices steadied on news that OPEC+ will hold its delayed meeting online this weekend instead of in person. Asian equities stumbled as property company worries resurfaced, while European equities struggled for traction after the latest economic data from Germany saw IFO business climate, current assessment, and expectations all fall below expectations. While some cyclical economic indicators in Europe appear to have bottomed, "that doesn't mean they were good", said Junius chief economist at Bank J.Safra Sarafin Ltd. "They still point to a negative fourth quarter and hence recessionary territory in the second half of 2023". In focus today, ECB's De Gulndos speech, CAD Retail Sales, US S&P Global Composite, Manufacturing & Services PMI data releases will help provide intraday direction to currency markets.

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In other news. Ceasefire takes hold in Gaza ahead of hostage release, aid enters enclave. Germany's economy shrinks slightly in the 3rd quarter. Finland warns Russia it is prepared to shut all border points over migrant pressure. Geert Wilders: the anti-Islam leader vowing to "put Dutch first"-FT. Germany to suspend borrowing limits for fourth year after debt brake ruling. China grapples with respiratory illness spike, WHO says no unusual pathogen found. China offers visa-free entry for citizens of France, Germany, and Italy. Tesla is ready to invest up to $2bln to build an India factory but with no riders-ET. TD Economist says it expects Canadian home prices to fall even further than it previously forecast for the third quarter and into early 2024.

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In currency news. The USD holds near 10-week lows in thin trading as many investors expected to have an extended US Thanksgiving holiday. Chinese yuan slips as equity markets retrace. Euro stalls at 1.0900 after weaker-than-expected German data. CNY and Asian currencies slipped 0.1% on average vs USD. Trading currencies are mixed with ZAR weakening by 0.45%, SEK is down 0.15%, while JPY and NOK are flat, CHF and MXN are up by 0.1%, and AUD and NZD gained by 0.2% vs USD.

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In commodity markets. Oil, Wheat, and Soybean prices are flat on average. Gold prices edged higher by 0.2%, Silver and Copper prices firmed by 0.4%.

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CAD slips off 2-week highs but holds steady within recent ranges as commodity prices slip, and investors remain cautious as bets increase that the BoC may shift to interest rate cuts as soon as April 2024. We remain longer-term bearish on CAD, as Canada is on the verge of a recession, and growth concerns have increased as the US economy is starting to show signs of weakness. The intraday focus will be on Cad retail sales ex-autos expected to decline -0.2% in September vs flat in August, while in the US focus will be on S&P Global Manufacturing & Services PMI which are both expected to ease, with Manufacturing PMI expected to slip below 50 which is seen as bearish.

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EURCAD holds steady in quiet trading, as investors await the CAD Retail Sales data to help provide direction to marets.

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EUR stalls at 1.0900 vs. USD in quiet holiday trading amid disappointing German data. German GDP Q/Q3 remained in negative territory , while y/y Q3 dropped below expectations confirming Germany is in a technical recession. IFO Business, Current Assessment, and expectations all fell below expectations and combined capped the euro's ability to strengthen amid a weakening USD. We anticipate trading will be subdued today with many American investors taking an extended Thanksgiving holiday. The focus will be on the US PMI data to provide further signs that the Fed interest rates have peaked, and EBC De Guindos will also be speaking, but markets are not anticipating any fresh interest rate comments.

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GBPEUR firmed, recouping its November losses vs EUR, breaching 1.1500 and showing up 0.2% for November.

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GBP extends gains amid a weakening USD and breaches 1.2550 in quiet trading. The pound managed gains amid a weakening USD and on the positive momentum from Thursday's UK PMI data. The UK Global CIPS Composite and Services both breach 50, which shows that markets have turned bullish, while manufacturing PMI gained from 44.8 to 46.7 in November, which also beat expectations. We expect markets to remain quiet today, unless the US PMI data prints outside expectations, we expect GBP will hold within its current trading range.