The Morning Update

The USD eased, oil prices retreated, equity markets rose, and US yields rose as risk sentiment improved. The U.S. dollar slipped for a second straight session as expectations of a potential Middle East ceasefire eased safe haven demand. The pullback follows a strong rally, with markets cautiously reassessing risk amid still uncertain geopolitical developments. Focus now turns to upcoming U.S. labour data, which will be key in determining whether the dollar resumes its upward momentum or extends its near-term correction. Global equities are rallying as optimism builds that the Middle East conflict may be nearing a resolution, lifting both stocks and bonds. The move is driven by a pullback in oil prices, easing inflation concerns and supporting risk sentiment. However, the rebound remains fragile, with markets still highly sensitive to geopolitical developments. Elsewhere, oil prices are easing as optimism around a potential de-escalation in the Middle East reduces immediate supply concerns. Gold continues to extend gains on safe-haven demand, while bitcoin strengthens above 68k amid improving risk sentiment. Today's focus will be on the US ADP Employment Change, Retail Sales, ISM Manufacturing PMI, and CAD S&P Global Manufacturing PMI to help drive direction to currency markets.

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News headlines. German minister urges nuclear rethink as energy prices soar. Italian PM Meloni hit by business backlash over botched support scheme. Trump says US could withdraw from Iran 'whether we have a deal or not'. Stocks rally on hopes that the war in Iran will end soon. Oracle is cutting thousands in the latest round of layoffs as the company continues to ramp up AI spending. Trump to address nation on Iran war Wednesday night, White House says. Silver prices had their worst month in 15 years. Canada's Finance Minister aims to shore up support and investment in China. American booze bans, 'Buy Canada' policy flagged by US as trade irritants.

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In currency markets. Against the U.S. dollar, currency markets are rebounding as the greenback eases, with the Swedish krona and Swiss franc strengthening on improved risk sentiment. The move reflects a partial unwind of safe-haven positioning, although markets remain sensitive to ongoing geopolitical developments. CNY advances 0.3%, while Asian currencies are up 0.15% on average against the USD. Trading currencies rebound, with KWD & JPY flat, MXN, NOK, DKK & NZD firmed 0.2%, ZAR, CZK & AUD gained by 0.3%, and SEK & CHF strengthened 0.55% against the USD.

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In commodity markets. Oil prices weaken 1.2%. Natural Gas, Coffee & Soybean prices fell 0.5%. Gold prices rallied 1.6%. Silver prices eased 0.4%. Copper prices are flat, and Wheat prices tumbled 1.75%.

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CAD continues to straddle the 1.3900 level despite a softer USD index, as improving risk sentiment tied to hopes of de-escalation provides limited support. The loonie has stabilized after rebounding from a near four-month low, with stronger-than-expected GDP data highlighting some domestic resilience. However, rate differentials and a cautious Bank of Canada outlook continue to weigh on the currency. Overall, the loonie remains elevated, with the 1.40 level emerging as a key psychological target if dollar strength resumes.

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EURCAD advanced nearly 1% in March, holding above 1.6100 and defying typical support for the Canadian dollar from higher oil prices. The move has been driven by a relatively hawkish ECB supporting the euro, while the loonie remains pressured by a dovish Bank of Canada and ongoing US-Canada trade tensions. Despite elevated crude prices, CAD has struggled to gain traction, highlighting the dominance of monetary policy divergence. Overall, EUR/CAD remains biased higher, with fundamentals favouring the euro.

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EUR is rising toward 1.1600 as a softer U.S. dollar and improving risk sentiment support the pair. The move is driven by optimism around potential de-escalation in the Middle East, encouraging risk flows. However, the broader outlook remains cautious, with technical signals still pointing to a mild bearish bias below key resistance. Focus now shifts to the upcoming U.S. data for confirmation of whether the recovery can be sustained.

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GBPEUR strengthens as expectations of tighter Bank of England policy continue to support the pound, outweighing solid Eurozone data. The euro has found some support from improving manufacturing activity, with PMI reaching its highest level in nearly four years, but gains remain limited. Markets remain focused on inflation trends and central bank policy paths, with geopolitical tensions continuing to shape sentiment and cap broader moves in the cross.

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GBP advances in early trading, with the pound pushing above 1.3300 as improving risk sentiment weighs on the U.S. dollar. The move is driven by growing optimism about a potential de-escalation in the Middle East, which is reducing safe-haven demand. However, gains may remain capped as elevated oil prices and expectations of higher U.S. rates continue to provide underlying support for the dollar.

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