The Morning Update

The USD steadies, oil prices ease, equity markets are up, and US yields rise as focus shifts to Friday's US inflation report. The U.S. dollar steadied in early trading after a stronger-than-expected jobs report dampened expectations for near-term Federal Reserve rate cuts and lifted Treasury yields. Markets have pared back easing bets, with the probability of a June cut falling sharply. Attention now turns to Friday’s inflation report, which will be key in determining whether the dollar can extend its rebound. Global equities advanced, led by Europe where the Stoxx 600 climbed on a busy earnings slate, while U.S. futures also pointed higher ahead of Wall Street’s open. Strong corporate results boosted sentiment despite lingering caution after the upbeat U.S. jobs report, with investors now turning to Friday’s inflation data for further policy clues. Asian markets continued to outperform, extending their year-to-date lead over U.S. peers as attractive valuations and firmer growth prospects draw global capital. Gold and oil prices slipped, easing after recent gains as momentum cooled across commodity markets. Bitcoin, meanwhile, found support around the $67,000 level, stabilizing after recent selling pressure. Today sees a light economic calendar, with focus on US Initial Jobless Claims and Existing Home Sales to help provide intraday direction.

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In the news. The House votes to override Trump's Canada tariffs. China wants to create a 'Polar Silk Road' through the Arctic. Russia blocks Meta's WhatsApp messaging service. Trump-Netanyahu meeting ends with no agreement on Iran strategy. Iran's President says it will open nuclear sites for 'verification'. Trump's policies will add $1.4 Trillion over next decade, watchdog says. Switzerland to vote on plan to cap population at 10mm. Foreign cars flow to Russia through China, skirting Ukraine war sanctions. Spain & Portugal on high alert as storms cause more damage. Nuveen to buy UK asset manager Schroders in GBP 10 billion deal.

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In currency markets. Against the U.S. dollar, the New Zealand dollar strengthened, supported by improved risk sentiment and its growth-linked profile. The Swiss franc also gained, benefiting from ongoing safe-haven demand amid softer dollar conditions. Meanwhile, the Chinese yuan firmed as broader diversification flows and steady policy signals underpinned the currency. CNY & Asian currencies, on average firmed 0.2% against the USD. Trading currencies are mixed, with KWD, NOK, & ZAR down 0.1%, JPY, AUD, DKK, & CZK flat, MXN & SEK up 0.15%, PLN gained 0.25%, and CHF & NZD strengthened 0.4% against the USD.

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In commentary markets. Oil & Gold prices slipped 0.25%. Natural Gas prices rallied 2.8%. Silver prices weakened 1%. Copper & Wheat prices gained 0.4%. Coffee prices strengthened 1%, and Soybean prices rallied 1.2%.

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CAD steadied after slipping on Wednesday, as stronger-than-expected U.S. jobs data boosted the greenback and pushed back expectations for near-term Federal Reserve rate cuts. Higher oil prices offered some support to the loonie, though a wider Canada-U.S. yield spread capped gains. Focus now shifts to Friday’s U.S. inflation report, which could prove pivotal for Fed expectations and the near-term direction for the loonie.

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EURCAD traded flat, with the cross consolidating as balanced support for both the euro and the Canadian dollar kept price action range-bound. Commodity price dynamics and central bank expectations continue to offset each other, leaving the pair without a clear directional catalyst.

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EUR remains capped at 1.1900 as a modest U.S. dollar rebound followed stronger-than-expected January nonfarm payrolls, which reinforced expectations that the Federal Reserve will keep rates on hold in the near term. The upbeat jobs data, alongside a dip in the unemployment rate, prompted markets to scale back bets on a March cut, lending the greenback renewed support. Traders now look to weekly jobless claims and, more importantly, Friday’s U.S. inflation report for clearer guidance on the Fed’s policy path and the pair’s next move.

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GBPEUR edged higher in early trading, though the broader outlook remains cautious after weak UK GDP data reinforced expectations of Bank of England rate cuts in March and June. Continued softness in hiring and wage growth could keep pressure on sterling, limiting the scope for sustained gains. As a result, while the pair has bounced modestly, the underlying bias remains fragile.

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GBP firmed in early trading, retesting 1.3650 despite softer-than-expected UK Q4 GDP data showing just 0.1% growth. While weak industrial output underscores the fragile domestic backdrop and keeps Bank of England easing expectations in play, broader U.S. dollar softness has helped cushion sterling. Near-term direction will likely hinge on upcoming U.S. data and Fed expectations rather than UK fundamentals alone.