The Morning Update

The USD remains steady, oil prices continue under pressure, while global equity markets and US yields are mixed as the US launches new strikes on Iran. The U.S. dollar found firmer footing as investor optimism around a near-term Iran peace agreement faded following renewed U.S. strikes and cautious comments from Secretary of State Marco Rubio. The shift back toward a more defensive market tone supported safe-haven demand for the greenback, while traders remained focused on whether negotiations can ultimately lead to the reopening of the Strait of Hormuz and a broader easing in geopolitical tensions. Global equity markets were mixed, with U.S. futures and UK markets gaining, while Asian and European equities retreated following renewed U.S. strikes on Iran. Investors remain cautiously optimistic that broader peace negotiations will continue despite the latest escalation, helping support overall risk sentiment. Elsewhere, oil prices remain under pressure despite renewed U.S. strikes on Iran, as investors continue to focus on the prospect of eventual progress toward reopening the Strait of Hormuz and restoring disrupted energy flows. Gold and bitcoin prices have also softened as safe-haven demand moderates and investors reduce defensive positioning. Today sees a light economic calendar; markets will focus on the US Consumer Confidence and the US Housing Price Index to provide intraday direction for currency markets.

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News Headlines. US strikes Iranian missile sites as peace talks continue. Carney warns Alberta separatists of Brexit-style regret. Real wages start to shrink in developed countries. Iran's top negotiators travel to Qatar amid intensified efforts to secure a deal. Netanyahu orders Israeli military to step up attacks on Hezbollah. Russia tells Rubio US citizens should leave Kyiv ahead of strikes on the Ukrainian capital. Dow futures jump over 200 points as oil tumbles on hopes US-Iran deal is close. Huawei plans new smartphone chips this fall as rivalry with Nvidia and Apple heats up. Canada looks to an unlikely trade partner as CUSMA talks remain uncertain.

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In currency markets. Against the USD, major currencies eased as fresh U.S. strikes on Iran and renewed uncertainty around peace negotiations boosted safe-haven demand for the dollar. Investors turned more cautious after Washington signalled that any agreement to reopen the Strait of Hormuz could still take time, supporting the greenback against the euro, pound, and other risk-sensitive currencies.

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In commodity markets. Oil prices tumble 4.3%. Natural Gas prices rallied 1.5%. Gold & Copper prices flat. Silver prices firmed 0.3%. Coffee & Soybean prices retreated 0.7%, and wheat prices weakened 1%.

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CAD steadied near the 1.3800 level against the U.S. dollar as investors weighed prospects for a Middle East peace agreement and monitored the Bank of Canada's policy outlook. However, the U.S. dollar found renewed support following fresh U.S. strikes on Iran, while weakening oil prices, ongoing CUSMA uncertainty, and continued debate around Alberta separation kept underlying pressure on the loonie.

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EURCAD is holding steady just below the 1.6100 level, with the longer-term outlook continuing to favour further upside in the pair amid growing policy divergence between the ECB and Bank of Canada. Expectations that the ECB may move toward additional tightening, contrasted with a more cautious BoC stance, alongside ongoing Alberta separation concerns and softer oil prices, continue to weigh on the Canadian dollar.

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EUR remains supported by expectations that the ECB could move toward another interest rate hike, after Chief Economist Philip Lane indicated that markets do not require additional guidance and acknowledged broader inflation risks beyond energy prices. However, EUR/USD drifted lower toward the 1.1600 level as the U.S. dollar firmed on renewed geopolitical tensions following fresh U.S. strikes on Iran, boosting safe-haven demand for the greenback.

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GBPEUR slipped in early trading as the euro found support from increasingly hawkish ECB rhetoric and rising expectations of a June rate hike. ECB policymakers continue to warn that elevated energy prices and prolonged tensions in the Middle East risk feeding broader inflationary pressures, while markets expect the Bank of England to keep rates unchanged at 3.75% through the end of 2026, limiting support for sterling.

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GBP eases in early trading, with the pound slipping back below 1.3500 as renewed Middle East tensions and fresh U.S. strikes on Iranian targets supported safe-haven demand for the U.S. dollar. Sterling also remains under pressure as UK gilt yields fall to monthly lows amid fading expectations for near-term Bank of England rate hikes.