The Morning Update

The USD, oil prices, equity markets, and US yields are all higher to start the day. Fed officials struck a cautious tone in yesterday’s speeches, while the release of the closely watched US employment may be delayed due to the government shutdown. The US shot down an Iranian drone near the Abraham Lincoln carrier in the Arabian Sea as nuclear talks loom and Trump warned of escalation if no deal is reached. The U.S. and Iran will meet in Oman on Friday for nuclear-focused talks after Tehran sought to avoid broader negotiations amid rising regional tensions. Trump and Colombia’s Petro agreed to cooperate on fighting drug trafficking and discussed U.S. sanctions, describing their meeting as optimistic and constructive.

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News Headlines. Ukrainian and Russian negotiators entered a second round of U.S.-brokered talks in Abu Dhabi as fighting intensified despite a recent energy truce. Xi and Putin reaffirmed strong China–Russia ties in a video call, calling their partnership a stabilising force amid rising global turbulence.

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In currency markets.  Prime Minister Takaichi’s fiscal pledges have fueled a sharp sell-off in JGBs, and with the BOJ unlikely to intervene aggressively, rising yields risk further pressure and volatility on the JPY (-0.67%). Other Asian followed with the CNY down 0.10%, KRW down 0.48% and SGD down 0.20%. The AUD kept yesterday’s gain up 0.14% while the NZD gained 0.52%.

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In commodity markets. WTI crude rose 0.20% on Wednesday, extending gains as tensions flared after the US downed an Iranian drone near an aircraft carrier in the Arabian Sea. Gold rose back above the $5,000-an-ounce mark on Wednesday, extending its rebound after jumping more than 6% in the prior session. Silver rose for a second day as sentiment improved after a historic two-day selloff erased nearly 40% of its value. Agricultural commodities are all moving lower with soybeans down 0.26%, wheat down 0.60% and lumber off 0.42%.

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USD/CAD eased on Tuesday after two days of gains, with the Canadian dollar finding some support as the pair paused near recent highs and traders awaited clearer directional catalysts.

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EUR/CAD remained supported near recent highs as the Canadian dollar stayed pressured by weaker oil prices and cautious risk sentiment, while markets awaited key North American labour data for fresh direction.

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EUR/USD lost some ground as softer Eurozone inflation capped gains, while the dollar stayed supported after the US shutdown ended and markets awaited key labour data amid confidence in Warsh’s Fed nomination.

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GBP/EUR rose slightly but remains in a broader bullish consolidation near key support, with downside still limited.

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GBP/USD held near multi-month highs as stronger UK services data contrasted with softer Eurozone inflation and slowing activity, keeping sterling supported.

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