The Morning Update

The USD is flat, oil prices steady, equity markets are down, and US yields rise amid ongoing US-Iran conflict. The U.S. dollar is flat in early trading as investors balance softer U.S. inflation data against ongoing geopolitical risks in the Middle East. While this week's weaker CPI and PPI reports have reduced expectations of a near-term Federal Reserve rate hike, Fed Chair Kevin Warsh reiterated that the Fed has "no tolerance" for persistently elevated inflation, leaving markets cautious despite easing price pressures. Global equity markets are mostly lower in early trading, with U.S. futures little changed and European shares under pressure as investors reassess lofty AI-related valuations despite another strong earnings report from Taiwan Semiconductor. Broader sentiment remains cautious amid ongoing U.S.-Iran tensions and the start of earnings season, with today's U.S. retail sales data and a fresh round of corporate earnings expected to provide the next direction for markets. Elsewhere, oil prices are steady after a four-day rally as markets continue to monitor escalating U.S.-Iran tensions and the risk of supply disruptions through the Strait of Hormuz. Gold and Bitcoin are easing in early trading as investors await fresh macroeconomic data and assess the outlook for interest rates following this week's softer U.S. inflation reports. In focus today: Markets will be watching U.S. retail sales, initial jobless claims, the Philadelphia Fed Manufacturing Index and business inventories, along with speeches from Fed officials Lorie Logan, Jeff Schmid and Philip Jefferson, with the releases expected to provide fresh direction for the U.S. dollar and broader currency markets.

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News Headlines. Europe Inc heads into strongest earning season in years, but AI gap persists. Wall St futures pause after two-day rally as investors await data and earnings. BlackRock assets cross $15 Trillion, adding $192 Billion of cash. The US will not win Iran war from the air, Trump's ex-defence chief warns. SpaceX sell-off wipes $1tn from Musk's rocket group. Uber agrees Eur 13 billion deal to acquire Delivery Hero. Mahmood set to be named UK chancellor by Burnham. Trump administration slaps 25% tariff on Brazil as ties deteriorate. Wildfire smoke blankets Toronto, turning skies orange and prompting air quality warning.

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In currency markets. Against the U.S. dollar, G10 currencies are mostly steady, with most majors easing slightly as traders consolidate positions following this week's softer U.S. inflation data. Commodity-linked currencies remain relatively resilient, while markets continue to assess Middle East developments and the outlook for Federal Reserve policy after Chair Kevin Warsh reaffirmed the Fed's commitment to containing inflation.

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In commodity markets. Oil -0.10% | Nat Gas -0.35% | Gold -0.51% | Silver -0.36% | Copper +2.10% | Palladium +0.55% | Coffee -2.00% | Cocoa -3.20% | Soybeans +0.55% | Wheat -0.95%

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CAD is steady in early trading after reaching a four-week high against the U.S. dollar, supported by stronger oil prices as the escalating U.S.-Iran conflict continues to fuel concerns over potential supply disruptions through the Strait of Hormuz. While the Bank of Canada left interest rates unchanged at 2.25% and adopted a slightly less hawkish tone, markets are now looking to U.S. economic data and the Federal Reserve's policy outlook for the next directional move.

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EURCAD stalls just below 1.6100 in early trading as hawkish ECB commentary continues to support the euro, offsetting the impact of weaker Eurozone economic data. Higher oil prices and ongoing supply concerns linked to the escalating U.S.-Iran conflict are providing underlying support for the Canadian dollar, leaving the cross largely rangebound.

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EUR is steady in early trading, consolidating below 1.1475 as softer U.S. inflation data continues to weigh on the dollar, while escalating U.S.-Iran tensions keep broader risk sentiment cautious. Hawkish ECB rhetoric continues to provide underlying support for the euro, although weaker Eurozone trade and industrial production data have tempered upside momentum, with today's U.S. retail sales, weekly jobless claims and Fed commentary expected to provide the next directional catalyst.

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GBPEUR eases modestly in early trading after recent strong gains, but continues to trade close to one-year highs. Softer-than-expected UK industrial production has tempered sterling's momentum, while hawkish comments from ECB officials have lent some support to the euro, although expectations that the Bank of England will maintain a more restrictive policy stance continue to underpin the medium-term outlook for GBPEUR.

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GBP softens modestly in early trading after mixed UK economic data showed GDP expanded in line with expectations in May while industrial production disappointed, reinforcing a cautious outlook for the economy. Politically, investors remain focused on the transition to Andy Burnham's government, with reports that Shabana Mahmood is expected to become Chancellor—a choice viewed as supportive of fiscal discipline and policy continuity, helping to reassure financial markets.

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