The Morning Update

The U.S. dollar holds steady in early trading as markets balance softer U.S. inflation and producer price data against persistent geopolitical risks stemming from the escalating U.S.-Iran conflict. Investors are now focused on upcoming U.S. consumer sentiment data and Federal Reserve commentary for fresh policy signals, while higher oil prices continue to underpin inflation expectations. Global equity markets are under pressure as the selloff in semiconductor and AI-related stocks deepens, with Nasdaq 100 futures down 1.8% and S&P 500 futures falling 0.9%. Asian markets declined sharply, led by Taiwan, while European losses were more measured due to the region’s lower technology exposure; renewed U.S.-Iran tensions and concerns over elevated chip valuations are adding to risk aversion. Elsewhere, oil prices are on track for a positive weekly gain as escalating tensions in the Middle East and concerns over potential supply disruptions through the Strait of Hormuz continue to support crude. Gold is holding steady after rebounding from recent lows as investors seek safe-haven assets, while Bitcoin remains under pressure amid broader risk aversion and profit-taking across technology and digital assets. Elsewhere, oil prices are on track for a positive weekly gain as escalating tensions in the Middle East and concerns over potential supply disruptions through the Strait of Hormuz continue to support crude. Gold is holding steady after rebounding from recent lows as investors seek safe-haven assets, while Bitcoin remains under pressure amid broader risk aversion and profit-taking across technology and digital assets.

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News headlines. Global tech stocks fall as AI trade goes into reverse. Trump Media to sell high-speed access to the president's social media posts. The US escalates attacks on Iran as it expands range of targets. Zelensky government in turmoil after defence minister fired. Burnham plans policy blitz on entering Number 10. Chinese AI start-up Moonshot launches model challenging Anthropic's lead. Global equity funds draw inflows for the eighth week on earnings optimism. Nasdaq futures tumble 1.5% as ChipRout deepens. Canada's PM Carney says the Gordie Howe bridge tolls won't be split with the US until the $6.4B of debt is repaid.

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In currency markets. Against the USD, currency markets came under pressure on Friday as geopolitical tensions boosted demand for the greenback, with the Australian dollar leading losses among the G10 currencies while the South African rand weakened even more sharply across emerging markets.

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In commodity markets. Oil +2.0% | Nat Gas +0.5% | Gold +0.2% | Silver +0.8% | Copper -1.9% | Palladium -1.7% | Coffee +0.4% | Cocoa +5.1% | Soybeans -0.2% | Wheat Flat

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CAD holds steady near a four-week high, supported by narrowing Canada-U.S. two-year yield spreads as softer U.S. inflation reduces expectations for further Federal Reserve tightening, while elevated oil prices continue to underpin the loonie. However, TSX futures are pointing lower, tracking a global selloff in semiconductor stocks and broader risk aversion, while weaker Canadian housing starts and ongoing uncertainty over U.S.-Canada trade negotiations are limiting further gains.

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EURCAD eases as stronger commodity prices, particularly oil, continue to underpin the Canadian dollar, while the euro remains comparatively softer despite expectations for the ECB to maintain a relatively restrictive policy stance. Near-term risks remain tilted to the downside for the cross as ongoing Middle East tensions continue to support commodity-linked currencies.

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EUR slips modestly against the U.S. dollar as investors favour the greenback amid escalating U.S.-Iran tensions and a broader flight to safety. However, expectations that the European Central Bank will keep monetary policy relatively restrictive and continued uncertainty over the inflationary impact of higher oil prices are helping to limit the euro's downside.

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GBPEUR edges lower as the euro finds support ahead of next week's ECB meeting, with markets seeing scope for President Lagarde to deliver a more hawkish policy outlook for the remainder of 2026. While the ECB is widely expected to leave rates unchanged, firmer guidance could lift the euro and keep near-term risks tilted toward a softer pound against the single currency.

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GBP softens toward 1.3400 against the U.S. dollar as renewed U.S.-Iran tensions support safe-haven demand, while political uncertainty ahead of Andy Burnham becoming prime minister adds caution. Investor concerns centre on the incoming government’s spending plans and commitment to fiscal discipline, although reports that Shabana Mahmood could become Chancellor have helped ease some of the pressure on sterling.

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