The Morning Update

The USD weakens, oil prices rally, equity markets are mixed, and US yields rise ahead of key US jobs data. The U.S. dollar remained under broad pressure, weakening across major currency pairs after softer-than-expected retail sales and slower labour cost growth bolstered expectations of Federal Reserve easing. Markets are increasingly pricing in rate cuts later this year, keeping the greenback on the defensive despite some policymakers signalling patience. Focus now turns squarely to today’s delayed January nonfarm payrolls report, which could prove pivotal in determining whether the dollar’s slide extends or finds support. Global equities wavered as investors turned cautious ahead of the closely watched U.S. jobs report, with S&P 500 futures little changed after recent gains. European stocks were mixed to weaker, pressured by renewed concerns over AI-driven disruption in the software sector, while Asian markets showed a steadier tone. With Treasury yields near one-month lows and markets debating the pace of potential Fed rate cuts, equities are struggling to find clear direction as traders await fresh labor market signals. Elsewhere,Bitcoin tumbled around 3%, sliding toward the $66,500 level as selling pressure intensified in digital assets. In contrast, gold and oil both rallied, supported by safe-haven demand and firmer energy market fundamentals. Focus today will be on the US Average Hourly Earnings, Nonfarm Payrolls, Nonfarm Payrolls Benchmark Revisions, and the US Unemployment rate to provide direction to currency markets.

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In the news. Zelenskyy planning elections in Ukraine and vote on peace deal. Netanyahu set to urge Trump to take hard stance with Tehran in Washington visit. Swedish PM 'very sceptical' of French push to buy European. Co-founder of Musk's xAI join exodus from start-up's tech team. Heineken to cut 6,000 jobs as beer demand declines. US House votes down tariff rule in rebuke to Trump. In Cuba, people go without food and power as the US chokes oil supply and tourists flee. UK firms chase sterling bond demand after Alphabet's bumper deal. Weak jobs data seen as a potential catalyst to push stocks higher. Canada discreetly puts money down on 14 additional F-35s.

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In currency markets. The U.S. dollar stayed under pressure, slipping against higher-yielding and commodity-linked currencies as rate-cut expectations weighed on USD sentiment. The Australian dollar pushed above $0.71 for the first time in three years following the RBA’s hawkish stance, while the Norwegian krone strengthened to its firmest level against the greenback since 2022 after stronger inflation data reduced easing bets. CNY is flat, while Asian currencies gained 0.15%, on average against the USD. Trading currencies are mixed, with PLN easing 0.25%, KWD flat, CZK up 0.2%, CHF, MXN, & DKK firmed 0.3%, NZD & ZAR gained 0.5%, AUD strengthened 0.6%, and JPY rallied 0.75% against the USD.

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In commodity markets. Oil & Wheat prices gained 1.2%. Natural gas prices firmed 0.8%. Gold prices advanced 1.75%. Silver prices rallied 6.3%. Copper prices strengthened 2.2%. Coffee prices up 0.5%, and Soybean prices eased 0.3%.

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CAD extends gains in early trading to multi-week highs, as softer U.S. dollar sentiment and expectations of a renewed commodities investment cycle underpinned the loonie. Markets largely dismissed fresh U.S.-Canada tensions over the Detroit-Windsor bridge, focusing instead on supportive FX flows tied to natural resources and broader commodity dynamics. Attention now turns to today’s U.S. jobs data, which could prove decisive for near-term USD/CAD direction and broader dollar momentum.

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EURCAD eased in early trading as strengthening commodity prices underpinned the Canadian dollar. Firmer oil and broader raw material gains lent support to the loonie, offsetting steady sentiment around the euro.

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EUR held firm as broad U.S. dollar weakness persisted ahead of the delayed January nonfarm payrolls report. Softer retail sales and lower Treasury yields have weighed on the greenback, though caution is building with payrolls expected to show modest job growth and a steady unemployment rate. ECB officials have reiterated that inflation is broadly on track, leaving the focus squarely on U.S. jobs data to drive near-term direction.

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GBPEUR advanced in early trading as the pound staged a modest rebound from recent lows despite ongoing UK political uncertainty. A slight pullback in the euro and short-covering flows allowed sterling to recover some ground.

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GBP rebounded against the dollar, with the pound pushing higher as a softer greenback and lingering hawkish undertones from the Bank of England underpinned sterling. While political uncertainty in the UK remains a headwind, markets continue to focus on the BoE’s relatively firm policy stance compared with growing expectations for Federal Reserve easing.

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