The Morning Update

The USD firms, oil prices weaken, equity markets, and US treasuries are mixed ahead of data and holidays. The USD bounced off its weakest levels in almost three months after the Fed minutes showed policymakers united to "proceed carefully", and keep further rate hikes on the table. Oil prices eased on signs of another stockpile buildup in the US. Asian equities fell as tech & AI stocks slipped, European equities gained, while UK FTSE dipped into negative territory. We anticipate markets will start to consolidate with no high-tier data releases today and with markets closed on Thursday in the US for Thanksgiving and in Japan for Labor Thanksgiving Day. In focus today, are US Durable Goods, Initial Jobless Claims, Michigan Consumer Sentiment Index, UoM 5-year Consumer Inflation Expectations, and CAD BoC's Governor Macklem Speech.

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In other news. Israel approves hostage deal with Hamas. President Lagarde warns ECB 'not done' in inflation fight. EU urges member states to scrap energy subsidies. US and Philippines launch joint air and sea patrols to counter China. Canada to run deeper deficits as PM Trudeau tackles housing. US thwarted plot to kill Sikh separatist on American soil, Washington warns India-FT. Sam Altman was restored as OpenAI CEO after his tumultuous ouster. UK Finance Minister Hunt to cut taxes to boost economy and election prospects. Nvidia's outlook beats expectations but China's worries linger. Binanced's Zhao pleads guilty and steps down to settle illicit finance probe.

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In currency news. The USD rebounded from 10-week lows after the Fed minutes kept the rate hike prospect on the table. Chinese Yuan slips despite another strong fixing, with the upside seen as limited. Argentina's black market peso slides with eyes on new President Milei. Commodity currencies are steady as markets appear to be consolidating ahead of the US holiday. CNY slips 0.25%, while Asian currencies dipped 0.2% on average vs USD. Trading currencies are mixed JPY, ZAR & NOK fell 0.4%, NZD is down 0.3%, MXN & CHF eased 0.1% while AUD is flat and SEK firms 0.1% vs USD.

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In commodity markets. Oil prices weakened by 0.7%, Natural Gas prices edged higher by 0.25%, Gold prices are flat, while Silver prices firmed by 0.15%, Copper prices weakened by 0.8%, Wheat prices gained by 0.65%, and Soybean prices dropped by 0.85%.

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CAD holds steady at 1.3700 after Canada's annual inflation rate beat expectations to 3.1% in October, while the Fed minutes left the prospect of future interest rate hikes on the table. Markets will be focused on BoC Governor Macklem's comments today, with markets expecting him to take a dovish tone as inflation levels ease and the domestic economy shows signs of entering recession. CAD remains vulnerable to further weakness with the prospect that the BoC could lead global central banks by easing interest rates in 2024, and concerns for domestic growth with the prospect of the US growth slowing down, which has increased bearish bets on the loonie hitting a 6-year high.

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EURCAD holds steady near 6-month lows as currency markets steady ahead of the US and Japanese holidays.

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EUR failed 1.0950 and is drifting lower to 1.0900 as the market mood sours. The USD rebounds in early trading as markets consolidate positions ahead of the US holiday, despite hawkish comments from ECB President Lagarde on Tuesday. President Lagarde warned against premature inflation celebration, saying that victory on inflation has not yet been won and bets based on short-term data flow are premature. Intraday markets will be focused on US Initial Jobless Claims which is expected to have eased slightly m/y, while Durable Goods orders are expected to weaken m/m. We anticipate the Euro will likely ease towards 1.0850 as investors take profits as investors take profits into the US holidays.

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GBPEUR steadies after rebounding from 1.1400 towards 1.1500 in the last week as investors start to take profits on Euro gains on the back of a more hawkish BoE.

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GBP remains resilient above 1.2500 as the focus shifts to the UK Autumn forecast. Chancellor Hunt will deliver his Autumn Statement to the country today. The UK economic forecast shows that growth has stagnated and Britain is teetering on the edge of a recession. The silver lining for Mr Hunt is that inflation has halved over in 2023, leading him to say the economy had "turned a corner" and is fuelling expectations he will unveil tax cuts today. BoE official's comments continue to suggest that they remain cautious about dismissing additional tightening in the future, but equally are not expecting to lower interest rates either. The focus will be on the US data to help provide intraday direction to the pound.