The Morning Update

The USD is down, oil prices weaken, equity markets are mixed, and US yields ease heading into the FOMC minutes. Markets steady in early trading as investors shift their focus to the minutes of the Fed's October 31st-November 1st policy meeting. "We are not expecting any major new information, but the minutes could be less dovish than the current market pricing," said Kumar, an MD at Jefferies International. "The minutes are likely to indicate that the door is still open for another hike and emphasize that rates need to be kept on hold for longer." In the equity markets, Goldman Sachs strategists said there is a risk of "disappointment in the near term" amid lingering concerns about economic growth and inflation, while Citibank warned of the possibility of a short squeeze that could derail the rally. Oil prices dipped paring a two-day advance that had been driven by speculation that OPEC+ may deepen supply cuts at its meeting this weekend. In focus today, are the US FOMC Minutes, ECB President Lagarde's speech, and CAD Consumer Price Index.

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In other news. OpenAI's future hangs in the balance amid standoff between staff and board-FT. Over 75% of foreign money invested in Chinese stocks in 2023 has left. Blackstone to shut its multi-strategy fund after assets fall 90%. Israel battles on as Hamas signals truce for hostages. The ECB says property slump could last years in threat to lenders. Two ships diverted course away from the Red Sea after a vessel was seized by Houthis. Germany freezes new spending commitments as budget woes deepen. Canadian Finance Minister Chrystia Freeland to table liberals' fall economic statement today.

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In currency markets. Emerging markets currency gauge tests 22-month highs, while the USD languishes near its lowest level in 10 weeks. Japanese yen rallies to its highest level for two months. Chinese Yuan nears 4-month highs on firmer fixing and improving Sino/US tensions. CNY extends gains up by 0.5%, while Asian currencies are firmed by 0.2% on average vs USD. Trading currencies extend gains with AUD, SEK, MXN & CHF up 0.15%, NOK gaining 0.3%, and JPY & NZD firmed 0.45%, while outlier ZAR weakens by 0.3% vs USD.

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In commodity markets. Oil prices slipped by 0.35%, Gold prices firmed by 0.5%, Silver prices gained by 0.15%, Copper prices fell by 0.25%, Wheat prices edged higher by 0.1%, and Soybean strengthened by 0.6%.

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CAD is little changed as it attempts to edge higher, but struggles to break through 1.3700 despite the extended weakness in the USD. CAD continues to underperform its G10 peers falling nearly 2% vs GBP, down 2.25% vs EUR, and tumbling 2.6% vs JPY in November. Speculators have raised their bearish bets on the loonie to the most in 6-years according to data from the US CFTC despite a weakening USD and as oil prices rebound. Today's focus will be on the BoC CPI y/y and CPI y/y which is expected to see inflation ease from 3.8% in September, forecasted to 3.2% in October.

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EURCAD stalls at 6-month highs holding just below 1.5000 as markets steady heading into the Canadian inflation report.

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EUR stalls below 1.0950 as markets consolidate and of the Fed minutes. The euro has continued to edge higher on the back of a weakening USD and from hawkish comments from the ECB. ECB policymaker Francois Villeroy de Galhau commented Monday that he expected key interest rates to remain where they are for the next few quarters. EBC Pablo Hernandez de Cos also reiterated that it was "absolutely premature" to start talking about interest rate cuts and added that he did not expect the ECB to return to forward guidance on monetary policy. Investors will be focused on the Fed Minutes and ECB President Lagarde's speech today for guidance.

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GBPEUR bounces off six-month lows after hawkish comments from the BoE governor today commenting that UK rates will stay higher for longer.

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GBP tests 1.2550 after BoE Governor Bailey testifies before parliament. The BoE Governor took a hawkish stance today as he warned markets not to expect the UK inflation to fall quickly. Bailey told MPs that investors were putting "too much weight" on current data releases that show a fall in headline inflation. "We are concerned about the potential persistence of inflation as we go through the remainder of the journey down to 2%" - "And I think that market is understanding that". The focus will shift to the Fed minutes and ECB Lagarde's speech for direction, as the pound remains vulnerable to longer-term weakness as weak growth and ongoing labor disputes will continue to keep pressure on the pound.