The Morning Update

The USD edged lower, oil prices slipped, equity markets rebounded, and US yields moved lower. The USD traded lower as markets weighed uncertainty around the Middle East ceasefire and ongoing US-Iran tensions near the Strait of Hormuz. Precious metals rallied as the renewed conflict boosted safe-haven demand and reignited inflation concerns despite hopes of avoiding further escalation. Bitcoin weakened as geopolitical uncertainty triggered profit-taking despite continued ETF inflows and strong institutional demand, while analysts remained cautiously optimistic about the longer-term crypto outlook. Meanwhile, key US employment data due later today could provide further clues on the Federal Reserve’s next policy move.

‍

News Headlines: A US federal court ruled that President Trump’s global tariffs were illegal and exceeded executive authority, dealing a setback to the administration’s trade policy as an appeal is expected. US-Iran tensions escalated after clashes in the Gulf and attacks near the Strait of Hormuz, while the fragile ceasefire came under further strain after the UAE was hit by missile and drone strikes and responded militarily, despite President Trump insisting that diplomatic negotiations remain ongoing. UK political uncertainty increased after Labour suffered heavy local election losses while Reform UK made major gains, reinforcing signs of a broader shift away from Britain’s traditional two-party system.

‍

In currency markets. Global currency markets remained driven by geopolitical tensions and central bank expectations, with the US dollar softening as investors monitored the fragile US-Iran ceasefire and awaited key US employment data. The euro gained support from hawkish ECB expectations, the pound remained firm following UK local election results, while commodity-linked currencies such as the Canadian dollar faced pressure from weaker crude oil prices. Meanwhile, USD/NOK and USD/SEK were among the biggest movers, both trading around 1% lower as the Norwegian and Swedish krona strengthened on improved risk sentiment and regional central bank expectations.

‍

In commodity markets. Oil prices dropped 0.11%. Natural gas gained 1.77%. Gold rallied 0.76%.  Silver rose 3.0%. Copper gained 1.88%. Coffee rebounded 1.0%. Soybean edged 0.04% lower, and Wheat lost 0.37%.

‍

USD/CAD pulled back from yesterday’s high, though the Canadian dollar remained pressured by softer crude oil prices as investors also looked ahead to Canada’s employment report for further insight into the strength of the domestic economy.

‍

EUR/CAD held firm as softer crude oil prices weighed on the Canadian dollar, while investors await ECB President Lagarde’s speech and Canada’s employment data for further direction.

‍

EUR strengthened as markets adopted a more hawkish view on the ECB amid renewed inflation concerns, while rising geopolitical tensions in the Middle East and fresh US tariff threats against the EU added to market uncertainty.

‍

GBP/EUR traded higher as sterling gained support while sterling outperformed the euro despite continued hawkish ECB expectations amid broader geopolitical uncertainty.

‍

GBP strengthened as investors assessed the fallout from UK local and devolved government elections, where Reform UK made strong gains while both Labour and the Conservatives lost support, against a backdrop of growing geopolitical instability in the Middle East.

‍