The Morning Update

The USD is flat, oil prices firm, while equity markets & US yields are mixed, as investors focus on geopolitical risk and Fed succession. The US dollar has come under renewed pressure as initial safe-haven demand linked to Venezuela has faded and markets refocus on macro fundamentals. Softer US data, including a slide in ISM manufacturing to a 14-month low, has weighed on the greenback and revived expectations for policy easing. Dovish remarks from Fed officials warning of potential labour-market weakness have reinforced this view. Attention is also turning to the upcoming Fed leadership transition, with uncertainty around succession adding to questions over the longer-term policy outlook and limiting sustained dollar strength. Global equity markets are mixed as the early-year rally in US stocks pauses and investors rotate toward regional and non-US markets. AI-led gains in US equities have moderated, with high valuations prompting greater diversification amid lingering macro uncertainty. Outside the US, sentiment remains more constructive, with emerging markets and Asian equities extending gains as investors seek relative value. Near term, upcoming economic data is expected to be key in determining whether the rotation deepens or US equities regain leadership. Elsewhere, Bitcoin has weakened toward the $93,500 level as momentum in digital assets cools amid shifting risk sentiment. Oil and gold prices remain broadly steady, reflecting a balance between geopolitical uncertainty and expectations of adequate supply. In contrast, silver continues to rally, extending its strong outperformance as investors favour precious metals with tighter market dynamics. In focus today are the German inflation report and the S&P Global Composite & Services PMI, to help provide direction to currency markets.

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In the news. Venezuela launches wave of repression after US seizure of Maduro. Italy and Pirelli try to end Chinese involvement in the tyre maker. Trump's seizure of Greenland would end NATO, warns Denmark. Maduro's opponent, Machado, vows to return to Venezuela and wants an election. Ukraine's allies meet with the aid to make security pledges concrete. Irish PM aims to discuss beef and dairy in Beijing trade talks. TSX climbs to record high as Venezuela turmoil boosts gold prices. Freeland to resign from Canada's parliament for new Ukraine role. Canada's Joly presses Lockheed for jobs as crucial F-35 decision nears.

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In currency markets. Against the US dollar, the Norwegian krone and Japanese yen have firmed, supported by stabilizing risk sentiment and selective demand for defensive and commodity-linked currencies. The yen has benefited from safe-haven flows, while the krone has found modest support despite subdued oil prices. In contrast, the Mexican peso has eased against the dollar, remaining more sensitive to shifts in risk appetite and broader USD moves. CNY is up 0.1%, while Asian currencies gain by 0.2% on average against the USD. Trading currencies are mostly under pressure, with CZK & MXN falling 0.25%, SEK, KWD, NZD, AUD, CHF down 0.1%, ZAR & PLN flat, JPY up 0.1%, and NOK firming 0.25%.

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In commodity markets. Oil prices firmed 0.5%. Natural Gas prices tumbled 2.2%. Gold prices up 0.25%. Silver & Coffee prices rallied 1.35%. Copper & Soybean prices flat, while Wheat prices eased 0.15%.

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CAD has steadied after lagging its G10 peers on Monday, when it weakened to its lowest level since mid-December amid concerns that Venezuelan crude could displace Canadian supply into the US market. While oil prices firmed, uncertainty around Canada’s largest export continued to cap upside for CAD. Focus now shifts to Friday’s Canadian unemployment report for signals on whether the currency can regain momentum.

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EURCAD has slipped in early trading as recent euro softness meets a steadier Canadian dollar after its earlier underperformance. Direction now hinges on upcoming German and Eurozone inflation data, alongside Friday’s Canadian unemployment report, which will be key in shaping ECB and Bank of Canada policy expectations.

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EUR has turned lower toward the 1.1700 area, giving back recent gains as the US dollar firms and investors position ahead of German inflation data. Expectations of a softer preliminary German HICP reading are weighing on the euro, while ongoing geopolitical risks continue to support the USD. Near term, the inflation print will be key for ECB expectations, with a downside surprise likely to pressure the pair further, while a stronger reading could help stabilize EUR/USD above recent support.

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GBPEUR is flat in early trading, holding near two-month highs as sterling remains supported by expectations of a gradual and cautious Bank of England easing path. Ongoing geopolitical tensions in Eastern Europe continue to weigh on euro sentiment, limiting upside in the single currency. Near term, attention turns to German inflation data, which will be key in shaping ECB expectations and determining whether GBP/EUR can extend its recent strength.

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GBP is steady against the US dollar after recent gains, supported by improved risk sentiment as geopolitical concerns linked to Venezuela ease. Weak US manufacturing data has weighed on the dollar, while expectations of a gradual easing path by the Bank of England continue to underpin GBP. Near term, focus turns to Friday’s US non-farm payrolls report, which will be key for Fed expectations and the next move in GBP/USD.