The Morning Update

The USD is lower, oil prices are steady, while equity markets and US yields are mixed as the US government shutdown comes to an end. The U.S. Dollar Index eased in early trading after the government shutdown ended, as investors became cautiously optimistic about a rebound in economic activity and awaited the resumption of key data releases. The relief rally in risk assets reduced safe-haven demand for the dollar, while expectations of potential Fed rate cuts later this year continued to limit its upside momentum. Global equities were mixed as investors weighed the end of the U.S. government shutdown against uncertainty over the Federal Reserve’s next policy move. U.S. stock futures fluctuated after recent strong gains, while Europe’s Stoxx 600 outperformed for a third straight session. In contrast, Asian markets were subdued, with tech shares lagging amid caution over elevated valuations and concerns about slower global growth. Elsewhere, oil prices remained steady as traders balanced concerns about supply with a cautious outlook for global demand. At the same time, gold climbed to three-week highs on growing expectations of easing Fed policy. Bitcoin extended its rally, supported by improving risk sentiment and renewed institutional inflows. Another quiet economic session is expected, as US data remains unavailable. Therefore, the focus will remain on a flurry of central bank speakers from the BoE, ECB, and the Fed, which will help provide intraday direction to currency markets.

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In the news. Trump signs spending bill to end the longest-ever US shutdown. The White House signals it will cut tariffs to help ease high food prices. The UK economy unexpectedly contracted by 0.1% in September. Germany finalizes plans for military service and a larger army. The weaker UK growth boosts December rate cut chances. Polievre says he is not reflecting on his leadership style after MP departures. World oil market faces even larger 2026 surplus, IEA says. BoJ aims for wage-driven inflation, aligning with the government's view. Zelenskiy says Ukraine's survival rests on funds from allies. Canada sanctions Russian drone makers, 'Shadow Fleet' vessels.

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In currency markets. The Australian Dollar strengthened against the U.S. Dollar, supported by firm trade data and optimism over China’s economic outlook despite cautious signals from the RBA. The Swiss Franc also gained as safe-haven demand persisted amid global uncertainty. Meanwhile, the South African Rand advanced as improved risk sentiment and easing U.S. dollar strength boosted emerging-market currencies. CNY gains 0.25%, while Asian currencies are flat on average against the USD. Trading currencies rebound, with JPY & KWD flat, MXN, NZD, DKK, and PLN up 0.2%, CHF, CZK, NOK, and SEK firmed by 0.3%, AUD strengthened by 0.5% and ZAR rallied 0.7% against the USD.

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CAD climbed to two-week highs, briefly breaking through 1.4000 as traders interpreted the Bank of Canada’s latest minutes as signalling a pause in its easing cycle. The loonie’s strength came despite weaker oil prices, with investors focusing instead on steady domestic policy expectations and optimism surrounding the U.S. government’s reopening. Markets now view the BoC as likely to remain on the sidelines barring any major economic shocks.

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EURCAD edged higher as both the euro and the Canadian dollar gained on improved risk sentiment following the end of the U.S. government shutdown. A steady Eurozone outlook supported the euro, while softer oil prices capped the loonie’s advance. Overall, the pair maintained a slight upside bias as markets welcomed renewed confidence in U.S. fiscal stability.

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EUR gained in early trading, buoyed by improved risk appetite after the U.S. government shutdown ended and confidence returned to global markets. However, the rally lost momentum as Eurozone industrial production rose only 0.2% in September, missing expectations of stronger growth and highlighting lingering weakness in the region’s manufacturing sector. Despite the disappointing data, EUR/USD held above 1.1600, supported by broad U.S. dollar softness and a cautiously optimistic market tone.

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‍GBPEUR cross is trading relatively flat in the early European session, showing little directional momentum as both currencies await fresh economic cues. The euro faces pressure after the Eurozone Industrial Production figures came in weaker than expected, signalling ongoing softness in the bloc’s manufacturing sector. Meanwhile, the British pound remains under scrutiny following the UK GDP report for September, which revealed unexpectedly weak growth and added to concerns about the UK’s near-term economic outlook.

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GBP recovered above 1.3150 despite weak UK data, following earlier losses driven by September GDP figures showing the economy contracted 0.1% and quarterly growth slowed to just 0.1%. The disappointing data reinforced expectations that the Bank of England may cut rates next month to support growth. However, renewed U.S. dollar weakness and improving global risk sentiment following the end of the U.S. government shutdown helped GBP/USD regain ground in early trading.