The Morning Update

The USD eases, oil prices continue to advance, equity markets come under pressure, and US yields rise as US-Iran conflict escalates. The U.S. dollar is easing in early trading as investors remain cautious ahead of today's key U.S. CPI report and Federal Reserve Chair Kevin Warsh's first congressional testimony, both of which could reshape expectations for the U.S. interest-rate outlook. Despite escalating U.S.-Iran attacks and ongoing concerns over the Strait of Hormuz, markets are taking a wait-and-see approach, with traders looking for confirmation that higher energy prices are beginning to feed through into inflation. Global equity markets are mixed in early trading, with Asian markets higher while European shares and U.S. futures are lower as investors avoid large positions ahead of U.S. inflation data, Federal Reserve Chair Kevin Warsh’s testimony and the start of the second-quarter earnings season. Technology shares are providing some support after a rebound in semiconductor stocks, but higher oil prices and renewed U.S.-Iran tensions are keeping broader risk appetite cautious. Elsewhere, oil prices continue to advance as escalating U.S.-Iran tensions keep supply concerns elevated, while gold and Bitcoin are edging higher ahead of today's U.S. inflation report and Federal Reserve Chair Kevin Warsh's testimony. In focus today: Markets will be watching U.S. CPI and the ADP employment change four-week average, alongside speeches from ECB President Christine Lagarde, BoE Governor Andrew Bailey and Federal Reserve officials, for fresh direction on interest-rate expectations and currency markets.

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News Headlines. China's monthly car exports surge past 1mn for the first time. Oil hits $87 as battle for Strait for Hormuz alarms energy markets. Spain begins Gibraltar airport checks as Brexit reaches the Rock. Dubai plans new port to bypass the Strait of Hormuz. US launches air strikes as Iran targets with cruise missiles. Ukraine's drone swarms test Moscow air defences. Nvidia halves Asia buyer list in China chip crackdown. Netanyahu opponent leads polls ahead of Israeli elections. Canada is making bet on Saudi Arabia despite war and political risk. Wells Fargo profit beats estimates on wealth and Investment banking.

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In currency markets. Against the U.S. dollar, G10 currencies are trading in relatively tight ranges as investors await today's U.S. CPI report and Federal Reserve Chair Kevin Warsh's congressional testimony for clearer direction on U.S. interest rates. The Norwegian krone is the notable outperformer, supported by surging oil prices as renewed U.S.-Iran tensions raise concerns over supply disruptions through the Strait of Hormuz.

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In commodity markets. Oil +3.80% | Nat Gas -0.30% | Gold +0.40% | Silver +0.30% | Copper +1.80% | Palladium +0.60% | Coffee +1.50% | Cocoa -1.80% | Soybeans -0.60% | Wheat -0.70%

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CAD strengthens to 1.4100 against the U.S. dollar, supported by higher oil prices as escalating U.S.-Iran tensions reinforce Canada's commodity-linked outlook. Attention now turns to today's U.S. CPI report and Federal Reserve Chair Kevin Warsh's testimony, with Wednesday's Bank of Canada interest-rate decision also in focus, where policymakers are widely expected to leave rates unchanged and maintain a cautious, wait-and-see stance.

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EURCAD eases in early trading despite firm ECB rhetoric, as stronger oil prices continue to support the commodity-linked Canadian dollar. Markets will also be watching comments from ECB President Christine Lagarde today for any fresh guidance on the policy outlook, while attention remains on Wednesday's Bank of Canada interest-rate decision, where rates are widely expected to remain on hold.

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EUR flat in early trading, straddling 1.1400 as investors weigh renewed U.S.-Iran tensions against cautious optimism that diplomatic efforts can prevent a broader regional conflict. Attention is firmly focused on today's U.S. CPI report and Federal Reserve Chair Kevin Warsh's congressional testimony, while recent ECB commentary continues to reinforce a data-dependent, meeting-by-meeting approach to monetary policy.

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GBPEUR edges higher in early trading, holding close to one-year highs as sterling continues to benefit from expectations that the Bank of England will maintain a more restrictive policy stance than the ECB. Investors will closely watch speeches from BoE Governor Andrew Bailey and ECB President Christine Lagarde today for fresh guidance on the interest-rate outlook and any signals on the widening policy divergence between the two central banks.

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GBP is holding steady above 1.3350 in early trading, with gains continuing to be capped by the 200-day moving average near 1.3400. BoE Governor Andrew Bailey said the renewed hostilities in the Gulf underline the uncertain global outlook but stressed that the UK's fiscal framework and banking system remain resilient, with growth remaining the key domestic challenge, while markets now turn their focus to today's U.S. CPI report and Federal Reserve Chair Kevin Warsh's congressional testimony.