The Morning Update

The USD steadies, oil prices rally, equity markets are down, and US yields are mixed as the US moves to blockade Iran. The U.S. dollar eases in early trading as markets assess the impact of a U.S. move to block the Strait of Hormuz. Despite heightened geopolitical risk, the USD reaction is mixed as investors weigh safe-haven demand against concerns over global growth and inflation. Direction remains uncertain, with energy market disruption and macro risks driving cautious positioning. Global equities weaken as renewed geopolitical tensions and the U.S. blockade of the Strait of Hormuz drive a surge in oil prices and revive inflation concerns. Asian and European markets are trading lower, with U.S. futures also under pressure as investors turn cautious. The move reflects fading optimism around earlier ceasefire hopes and rising uncertainty over global growth. Elevated energy prices continue to weigh on sentiment, keeping risk appetite subdued. Elsewhere, oil prices rally sharply amid fears of supply disruptions following the U.S. blockade of the Strait of Hormuz. Meanwhile, gold and bitcoin weaken as rising yields and heightened volatility weigh on investor demand. Today sees a light economic calendar, so focus will be on comments from the ECB, BoE & the Fed, alongside CAD Building Permits and US Existing Home Sales change to help provide direction to currency markets.

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News Headlines. Iran threatens to hit back against Middle East ports ahead of US blockade. Hungary's Orban concedes defeat as opposition secures landslide win. The EU ties the release of the Eur 35 bn fund to Hungary's break with the Orban era. Trump lashes out at Pope Leo for criticism of the Iran war. Oil prices soar above $100 a barrel as hope fades of an end to the Iran war. Sotheby's offers 7% interest to delay seller payouts amid cash squeeze. Treasuries edge lower as investors weigh up Trump-Iran warning. GLF said it is near a deal to buy secure waste for over $4.3 billion. Quebec Party picks Frechette as next Premier with election near.

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In currency markets. Against the U.S. dollar, currency markets come under renewed pressure as geopolitical tensions and the Hormuz blockade drive safe-haven demand. The USD strengthens broadly as investors adopt a more defensive stance amid rising oil prices and uncertainty. Most currencies weaken as risk-off sentiment returns and the dollar regains its haven appeal.

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In commodity markets. Oil prices rally 8%. Natural Gas prices advance 1.55%. Gold prices weaken 1%. Silver prices weaken 2.7%. Copper prices eased 0.6%. Coffee prices gained 0.6%. Soybean prices are flat, and Wheat prices strengthen 2%.

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CAD remains supported near the mid-1.3800s as renewed safe-haven demand for the U.S. dollar offsets strength in oil prices, which are underpinning the Canadian dollar. While rising crude prices continue to provide some support to the loonie, geopolitical tensions and a potential blockade of the Strait of Hormuz are driving defensive positioning into the USD. With no major Canadian data releases this week, direction is likely to remain driven by developments in the US-Iran conflict and broader risk sentiment.

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EURCAD slips in early trading as the Canadian dollar finds support from rallying commodity prices, particularly oil, which is underpinning the loonie amid renewed geopolitical tensions. Despite broader euro resilience driven by expectations of ECB tightening, the near-term move reflects a modest CAD outperformance as energy markets strengthen. Direction remains sensitive to shifts in oil prices and evolving US-Iran developments, with the cross likely to remain volatile in the near term.

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EUR eases in early trading, rebounding from early lows as the USD pares back safe-haven gains but remains under pressure, stalling below the 1.1700 level. While renewed US-Iran tensions and higher oil prices continue to support the dollar, expectations of ECB tightening and a supportive pro-EU election outcome in Hungary are helping underpin the euro. Near-term direction remains balanced, with markets closely watching energy developments and upcoming U.S. inflation data for further cues.

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GBPEUR holds steady around the 1.1500 level, consolidating within a narrow range as cautious market sentiment limits directional conviction. Elevated oil prices and geopolitical tensions are capping euro upside, allowing the pound to remain relatively supported in the near term. Focus now turns to upcoming remarks from BoE Governor Bailey and ECB President Lagarde, which could provide fresh impetus for the cross.

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GBP rebounds above the 1.3400 level after opening with a bearish gap, supported by dip-buying despite a firmer U.S. dollar in a risk-off environment. Ongoing US-Iran tensions and rising oil prices continue to underpin the greenback, limiting further upside in the pair. While hawkish BoE expectations offer some support to sterling, elevated yields and persistent geopolitical uncertainty are likely to cap gains in the near term.