The Morning Update

The USD strengthens, oil prices weaken, and equity markets and US yields are mixed amid rising inflation fears. The USD gains in early trading as investors turn cautious ahead of key central bank decisions and amid ongoing uncertainty surrounding U.S.–Iran negotiations. Safe-haven demand is underpinning the dollar, while markets continue to assess the inflation and growth implications of elevated oil prices. Global equities are mixed, with US and Asian markets under pressure while European indices trade modestly higher. Technology shares are leading declines as investors take profits following the recent AI-driven rally. Sentiment remains cautious amid elevated oil prices, rising yields, and ongoing uncertainty surrounding the Middle East conflict. Elsewhere, oil prices weaken on renewed hopes for progress in U.S.–Iran negotiations, easing immediate supply concerns around the Strait of Hormuz. Meanwhile, gold and Bitcoin also ease as softer oil prices reduce inflation fears, while investors remain cautious ahead of key central bank decisions and macroeconomic data. In focus today, the BoC CPI report, US Pending Home Sales, and ADP Employment Change, alongside the ECB's Lane speech, will help provide direction for currency markets.

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New Headlines. Xi told Trump that Putin might 'regret' the invasion of Ukraine. Standard Chartered to cut almost 8,000 jobs as AI use escalates. Israel seizes 1,000 sq km under Netanyahu's war strategy. The US eases Russian oil sanctions in a bid to contain the price surge in Iran. Home Depot says core shopper is resilient in the face of higher gas prices, sales rise 5%. Global inflation weighs on G7 as higher bond yields persist. Iran's energy shock supports the boom in renewables and electrification. The US says it's pausing long-standing military board with Canada. Canada-wide tourism is expected to continue to rise.

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In currency markets. Against the USD, currency markets are under pressure as inflation concerns and ongoing U.S.–Iran tensions drive cautious sentiment. Elevated oil prices and uncertainty surrounding developments in the Middle East are supporting safe-haven demand for the dollar, while investors reassess expectations for global central bank policy.

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In commodity markets. Oil & Copper prices weaken 1.1%. Natural Gas prices firmed 0.7%. Gold prices eased 0.4%. Silver prices tumbled 1.6%. Coffee & Soybean prices up 0.1%, while Wheat prices rallied 1%.

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CAD remains under pressure, testing fresh multi-week lows as broad USD strength and rising global bond yields weigh on the loonie. Reduced hopes for a resolution to disruptions around the Strait of Hormuz have pushed oil prices sharply higher, though the supportive impact on CAD is being overshadowed by shifting Fed expectations and stronger safe-haven demand for the dollar. Attention now turns to Canada’s upcoming inflation report, with markets watching closely for signs that persistently high energy prices could prompt the Bank of Canada to adopt a more aggressive tightening stance.

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EURCAD eases slightly in early trading as elevated oil prices continue to support the Canadian dollar. Focus today turns to the BoC inflation report, with markets watching for signs that higher energy costs are feeding further into consumer prices. Meanwhile, the euro remains underpinned by hawkish ECB expectations ahead of upcoming policy guidance.

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EUR remains under pressure against the USD, with EUR/USD trading below 1.1650 as uncertainty surrounding the U.S.–Iran conflict continues to support safe-haven demand for the dollar. The greenback is also underpinned by expectations that elevated energy prices could keep the Fed on a more hawkish path. Focus now turns to ECB commentary, with investors watching Lane’s speech today for further guidance on the outlook for rates and inflation.

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GBPEUR holds steady despite mixed UK employment data and ongoing political uncertainty, continuing to weigh on sterling sentiment. Softer labour market conditions are limiting support for the pound, while hawkish ECB rhetoric keeps the euro underpinned. Markets remain focused on ECB guidance and expectations for further policy tightening in the months ahead.

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GBP remains under pressure against the USD, with GBP/USD holding near 1.3400 as mixed UK labour data and ongoing political uncertainty weigh on sterling sentiment. Rising UK gilt yields and fiscal concerns continue to add pressure, while the dollar remains supported by hawkish Fed expectations. Focus now turns to upcoming US data and whether persistent inflation pressures keep the Fed on a tighter policy path.

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