The Morning Update

The USD eased, oil prices fell, and equity markets and US yields are mixed following Trump's delay in tariffs. The USD eased, resuming its downward trend after President Trump yesterday announced that he would delay the deadline for reciprocal trade tariffs from July 9th to August 1st. Asian equities were positive, the S&P edged higher after moving off record highs on Monday, while European equities eased in early trading. Global bonds retreated, while the 10-year US Treasury yield advanced two basis points to 4.40%. "Equity markets are focused on the positive news," said Wolf von Rotberg, at Bank J.Safra Sarasin. "Europe is working towards securing a framework agreement with the US, and the July 9th deadline was pushed out by another month. The market has learned to focus on the facts more than following the talk." Elsewhere, oil prices fell as markets asses the US tariff delays and the OPEC+ output boost. Bitcoin edged higher towards $ 108,500, while silver prices remained flat and gold prices eased in early trading. Today, the focus will be on the Canadian markets, which will be centred on the CAD Ivey PMI report. However, with the absence of key US economic reports, we expect markets to remain within relatively tight ranges.

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In the news. Trump renews threat to hit trading partners with steep tariffs. The US will send Ukraine more arms. Europe's biggest port readies for potential trade war with Russia. Japan and South Korea face 25% tariffs as Trump ramps up trade war letters to 14 nations. Japan calls Trump's latest tariff salvo 'regrettable' as nations scramble to meet the new deadline. Samsung expects second-quarter profits to more than halve as it struggles to capture AI demand. Canadians' job security gets shakier as trade war harms growth. Carney's cabinet searches for spending cuts as the defence bill grows. Royal Gold to buy Royalty Peer Sandstorm for $3.5 billion.

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In currency markets. The AUD outperformed its peers after the central bank surprised markets and kept the interest rate on hold today. The yen remains under pressure after the US reiterated its plan to impose 25% tariffs on goods from Japan. CNY is flat, while Asian currencies are up 0.1% on average against the USD. Trading currencies are mixed, with JPY falling 0.25%, DKK & CZK flat, CHF, MXN, SEK, and NZD up 0.1%, NOK firming 0.2%, AUD & ZAR strengthening by 0.4% against the USD.

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In commodity markets. Oil prices weakened by 0.8%. Natural Gas prices firmed by 0.3%. Gold and Soybean prices eased by 0.35%. Silver, Wheat and Copper prices are flat.

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CAD edges off Monday's lows but remains vulnerable to further weakness amid declining oil prices, weakening economic data, and ongoing concern over the US/Canada trade war. The Ivey Purchasing Managers Index (PMI) for June is expected to show a slight improvement, with forecasts around 49.1, compared to the 48.9 recorded last month. This indicates a continued contraction in Canadian economic activity, but at a slower rate than in May. Intraday, with the lack of US economic data releases, unless we see the Ivey PMI print outside of expectations, we anticipate the loonie will hold within current ranges.

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EURCAD holds above 1.6000 as investors continue to favour the euro, with markets increasingly expecting the EU to reach an agreement with the US on trade.

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EUR stalls below 1.1750 as the USD softens in early trading. The EU is working to finalize a preliminary trade agreement with the US this week that would allow it to retain a 10% tariff rate beyond August 1, while negotiations continue on a permanent deal. According to Politico, the US has proposed maintaining the 10% baseline tariffs, with carve-outs for specific sensitive sectors. We expect investors to stay on the sidelines due to the absence of key US data releases, while optimism about a US/EU trade deal should offer underlying support to the euro.

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GBPEUR drops below 1.1600 with investors remaining cautious on the pound amid the UK's ongoing political uncertainty, while the euro continues to be supported on optimism for a US-EU trade deal.

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GBP weakens through 1.3600 despite US softness, due to lingering UK political concerns. Investors' confidence in the pound remains subdued after last week's government U-turn on the UK welfare bill highlighted the government's fiscal vulnerability. The Welfare Bill announced an increase in the standard allowance for Universal Credit, which is expected to raise the financial debt burden by nearly £5 billion by fiscal year 2029-2030. Intraday, with the absence of key economic data releases from the UK or the US, we expect the pound to remain within its current range.

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