The Morning Update

The USD steadies, oil weakens, equities slip, and US yields are mixed ahead of key tech earnings and the Fed meeting. The USD edged lower as traders awaited a series of major central bank meetings, including the Federal Reserve, which is widely expected to deliver another rate cut. Market sentiment is also being shaped by President Trump’s Asia tour and anticipation of his meeting with Chinese President Xi Jinping, with hopes for progress on trade talks keeping investors cautious. Global equities lost momentum as investors adopted a cautious stance ahead of major U.S. technology earnings and the Federal Reserve’s policy announcement. The S&P 500 steadied near record highs, supported by easing U.S.–China trade tensions, though questions remain over the durability of AI-driven profit growth. In Europe, the Stoxx 600 slipped from its peak, with resource stocks weighing and mixed corporate results — notably weaker performances from Novartis and BNP Paribas but solid updates from HSBC and Nordex — highlighting a more selective market tone. Elsewhere, oil prices slipped as rising expectations of OPEC+ output outweighed optimism over U.S.–China trade progress, while gold fell sharply amid easing safe-haven demand and firmer equities. Bitcoin also declined as investors turned cautious ahead of central bank decisions, reducing exposure to risk assets. Today's economic calendar is light, so we expect investors to remain sidelined ahead of Wednesday's Fed, BoC & BoJ interest rate decisions.

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‍In the news. Amazon to cut 14,000 jobs across the corporate workforce. US & Japan leaders ink rate earths, nuclear power tie-ups ahead of Trump-Xi meet this week. Hurricane Melissa begins lashing Jamaica as a 'catastrophic' Category 5 storm. Stocks pause as markets brace for tech earnings and rate verdicts. Spain's blue-chip IBEX finally tops 2007 record high. Gold falls 2% to a three-week low on signs of easing US-China trade woes. Ontario Premier says he's not sorry for Ad that blew up trade talks. Canada's Wealthsimple is valued at C$10 billion in an equity round.

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In currency markets. The yen strengthened ahead of the Bank of Japan’s policy decision, as comments from U.S. officials reignited debate over the pace of Japan’s monetary tightening. The Chinese yuan climbs to its strongest level against the USD in nearly a year, amid optimism over a potential China-US trade deal. CNY firmed 0.2%, while Asian currencies are flat on average against the USD. Trading currencies are mixed, with ZAR, MXN & NOK down 0.2%, AUD, NZD, SEK, DKK, CZK & PLN are flat, CHF up 0.1% and JPY rallied 0.5% against the USD.

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In commodity markets. Oil prices fall 1.75%. Natural Gas prices tumbled 4.7%. Gold prices weakened 2.6%. Silver prices drop 1.9%. Copper prices eased 1%. Coffee prices down 0.15%. Soybean prices rallied 1% and wheat prices strengthened 0.9%.

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CAD holds steady, hovering around the 1.4000 mark against the U.S. dollar, as investors largely dismissed renewed tariff threats from Washington. Market reaction remained muted, reflecting a broader wait-and-see tone ahead of a pivotal week for central banks. With little domestic data to drive direction, focus is firmly on the Bank of Canada’s upcoming policy decision, where a 25-basis-point rate cut is widely expected in response to slowing growth and rising unemployment. Attention will also be on the Federal Reserve, as traders look for clues on the future pace of U.S. rate cuts and broader policy direction.

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EURCAD edged higher in early trading, breaching 1.6300 as softer oil prices and expectations of a Bank of Canada rate cut kept the loonie under pressure. With limited data releases today, market sentiment remains cautious ahead of key eurozone inflation figures later this week. The outcome of these data points, along with the BoC’s policy guidance, will likely set the near-term direction for EUR/CAD.

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EUR extended its gains against the USD, supported by a risk-positive market tone and optimism over easing U.S.–China trade tensions. Sentiment improved further after President Trump signed framework agreements on rare earths and other minerals with Asian partners, bolstering hopes for broader regional cooperation. Meanwhile, declining U.S. Treasury yields have limited the dollar’s recovery as investors anticipate additional policy easing from the Federal Reserve. Markets widely expect a 25-basis-point rate cut on Wednesday, with softer inflation data reinforcing the case for further accommodation. Ahead of the Fed decision, focus will be on U.S. housing and consumer confidence figures, though risk appetite is likely to keep the dollar under pressure in the near term.

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GBPEUR as traders turned cautious ahead of the European Central Bank’s monetary policy statement on Thursday. The euro found support as investors anticipated that the ECB would maintain current rates while signalling a data-dependent approach to future moves. Diverging policy expectations, with the Bank of England seen as nearing the end of its tightening cycle, added to the downward pressure on GBP/EUR.

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GBP eased, breaching 1.3350 after four straight days of losses as investors stayed cautious ahead of key U.S. inflation data due Friday. Softer-than-expected UK CPI, which held steady at 3.8% versus forecasts of 4%, strengthened expectations for a Bank of England rate cut, keeping sterling under pressure. Analysts noted that while weaker inflation initially dragged the pound lower, steady disinflation lessens the risk of stagflation and could help limit further downside. The U.S. dollar edged lower on dovish Federal Reserve expectations and improved risk sentiment, but traders remained reluctant to add fresh positions before the Fed’s policy decision. Optimism over potential progress in U.S.–China trade negotiations also lent mild support to risk assets. Still, easing UK shop price inflation and rising BoE easing bets continue to weigh on the pound’s near-term outlook.