The Morning Update

The USD weakens, oil prices firm, equity markets are up, and US yields ease as risk sentiment pivots. Currency markets rebounded, and equity markets strengthened on strong corporate earnings and Chinese stimulus measures. Equity markets gained after a flurry of positive earnings from technology companies reinforced the strength of the corporate tech and AI sector. China plans to stimulate its economy by cutting its biggest reserve requirement ratio for banks since 2021, allowing banks to increase lending and purchase government bonds. Elsewhere, oil prices gained on weakening USD and the ongoing tension in the Red Sea. German and the EU PMI results saw Manufacturing beat expectations while the services and composite data weakened below expectations. Bitcoin is down 20%, trading at $38,900 from its post-EFT highs. Today's US S&P Global Services & Manufacturing and the Bank of Canada interest rate decision are in focus.

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In other news. Eurozone downturn eases as manufacturing activity picks up. Bill Ackman and his wife, Neri Oxman, bought a stake in the Tel Aviv Stock Exchange. The US urges China to help curb Red Sea attacks by Iran-backed Houthis. Nuclear power generation will reach a record high in 2025, IEA forecasts. Turkish parliament votes to back Sweden joining NATO. Trump wins New Hampshire primary, but Haley vows to fight on. A Russian plane crashes with Ukrainian POWs on board. The UK says Fujitsu should pay hundreds of millions for Post Office scandal.

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In currency markets. CNY firms after the PBOC announces its stimulus measures. Commodity-linked currencies found support from China's stimulus announcement. CNY and Asian currencies firmed by 0.2% on average vs USD. Trading currencies turned positive, with AUD & NOK up 0.3%, NZD, SEK & MXN gaining 0.45%, JPY & CHF strengthened by 0.6%, and ZAR rallied by 0.9% vs USD.

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In commodity markets. Oil and Soybean prices firmed by 0.2%, Natural Gas prices rallied by 3.3%, Gold prices are up by 0.4%, Silver prices strengthened by 1.8%, Copper prices gained by 2.3%, and Wheat prices firmed by 0.9%.

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CAD remains steady as investors are sidelined ahead of the Bank of Canada interest rate decision today. It is widely expected that the Bank of Canada will keep interest rates on hold at 22-year highs at 5%. Investors will closely monitor Governor Macklem's comments to see if he takes a more dovish tone in which, he may suggest an imminent pivot towards an easier policy. The Governor's statement tone will help drive the intraday direction for the loonie today.

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EURCAD strengthens, bouncing off weekly lows as the loonie remains sidelined ahead of the BoC interest rate decision, and the euro bounces on the improving risk sentiment.

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EUR extends gains on improving risk sentiment, despite mixed PMI data. Euro bounced off six-week lows despite the data from Germany and the EU area showing that the private sector's economic activity continued to contract in January. The Euro rallied off 1.0800 towards 1.0900 on the swing in risk-positive sentiment, which put selling pressure on the USD. We anticipate the Euro will be capped intraday around the 1.0900 level as investors await Thursday's ECB rate decision and policy statement.

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GBPEUR has hit its highest level since September after the UK PMI data showed the economy is improving and the BoE will likely cut rates later than its peers.

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GBP rallies towards 1.2750 after upbeat UK PMI data and improved risk sentiment. The pound's bullish momentum returned, taking the pound to a fresh two-week high on improved UK PMI data. The UK PMI data printed above 50 showed growth in the private sector's business activity, increasing expectations that the Bank of England will likely be the last major central bank to pivot its interest rate policy as domestic inflation levels remain high. Intraday investors will monitor the USD PMI results to help provide direction to the pound.