The Morning Update

The USD is steady, oil prices rally, equity markets are down, and US yields are mixed as risk sentiment wanes. The USD holds firm in early trading, on track for a weekly gain as escalating US-Iran tensions and rising oil prices reinforce safe-haven demand. With the Strait of Hormuz effectively constrained and energy prices pushing higher, markets are increasingly pricing a delayed Fed easing cycle, keeping the dollar supported despite cautious sentiment. Global equities are under pressure, with U.S. futures and European markets lower as rising oil prices and stalled Iran talks weigh on sentiment. The recent stock rally is losing momentum as investors reassess geopolitical risks, with elevated energy prices and uncertainty around negotiations prompting a more cautious tone. Elsewhere, oil prices continue to rally amid renewed supply concerns linked to tensions in the Strait of Hormuz, pushing crude back above $100. Meanwhile, gold prices have weakened amid a firmer dollar and shifting inflation expectations, while Bitcoin has also softened as risk sentiment turns more cautious. Investors will focus on the US Global Manufacturing & Services PMI and Initial Jobless Claims to help guide currency markets.

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News Headlines. The US Navy Secretary was fired amid the Iran blockade. Brussels is set to lure Iceland into the EU through a fishing-policy lobby. Man Group hit by a single $6.1bn redemption. Iran war drives Panama Canal land prices to a record high. Trump envoy seeks to replace Iran with Italy in the football World Cup. UK business activity rose more than expected in April. Washington is demanding an 'entry fee' from Ottawa before trade talks (CBC). Iran tightens control of Hormuz after US calls off renewed attacks. Lebanon to seek ceasefire extension in US-hosted talks with Israel. Carney, boosted by a majority government in Canada, aims for a US trade deal.

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In currency markets. Against the USD, most major currencies are easing as geopolitical concerns around Iran drive renewed safe-haven demand for the dollar. Escalating tensions and uncertainty around the Strait of Hormuz are underpinning the bid for the greenback. In this backdrop, the dollar is firming while risk-sensitive currencies remain under pressure.

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In commodity markets. Oil prices rally 1.8%. Natural Gas prices eased 0.3%. Gold prices retreated 0.8%. Silver prices tumbled 3.2%. Copper prices weakened 1.7%. Coffee prices firmed 0.5%. Soybean prices up 0.15%, and Wheat prices advanced 1.1%.

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CAD holds steady near recent highs as firmer oil prices continue to lend support, offsetting a stronger U.S. dollar driven by safe-haven demand. Heightened Middle East tensions are capping upside in the loonie, keeping price action range-bound despite supportive commodity dynamics. Attention is also turning to the upcoming USMCA review, with policymakers signalling a firm stance against U.S. pressure, adding a layer of trade uncertainty that could influence the medium-term outlook.

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EURCAD slips in early trading as the euro underperforms following uninspiring Eurozone PMI data, while the Canadian dollar draws relative support from firmer oil prices. Broader risk sentiment remains cautious amid Middle East tensions, but USD strength is weighing more heavily on the euro side of the cross. Focus remains on ECB speakers for further guidance on central bank policy.

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EUR straddles 1.1700 as the pair consolidates after recent gains, with price action holding steady following mixed German and Eurozone PMI releases. The data failed to provide a clear catalyst for the Euro, while the U.S. dollar retains a modest bid amid a risk-averse backdrop tied to the situation in Iran. Near-term bias remains constructive from a technical standpoint, though momentum is moderating as markets await fresh direction from upcoming U.S. data.

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GBPEUR edges higher as sterling gains modest traction following in-line UK PMI data, while softer Eurozone PMI readings weigh on the euro. The divergence in activity data supports a near-term bid in the pound, nudging the cross higher in early European trade. On the policy front, the Bank of England is expected to maintain a cautious stance amid sticky inflation, while ECB officials signal a likely hold in April but keep the door open to gradual tightening later in the year, leaving the cross sensitive to evolving rate expectations.

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GBP inches higher against the USD as solid UK PMI data supports the pound, while the dollar’s safe-haven bid tempers broader upside. The move reflects relative resilience in UK activity, helping sterling edge firmer in cautious market conditions. Focus now turns to US PMI data and the Initial Jobless Claims report to provide further direction on the dollar and near-term rate expectations.