The Morning Update

The USD holds firm, oil prices weaken, equity markets are up, and US yields rise as optimism improves with the prospect of talks with Iran. The US Dollar holds firm as currency markets pause, with investors cautious amid conflicting signals on efforts to end the war in Iran. Despite tentative signs of progress, uncertainty around negotiations continues to support safe-haven demand for the greenback. At the same time, rising inflation risks linked to elevated energy prices are reinforcing expectations that the Federal Reserve may keep policy tighter for longer, underpinning the USD in the near term. Global equities rebound, with gains across US futures, European markets and Asian stocks as easing oil prices and renewed diplomatic efforts to end the Iran conflict support risk sentiment. The recovery follows a period of sharp losses, with investors responding positively to signs of potential de-escalation. However, caution remains elevated, as ongoing conflict and uncertainty around negotiations continue to limit conviction in the rally. Elsewhere, oil prices weaken as easing geopolitical tensions reduce immediate supply concerns. Meanwhile, gold and Bitcoin strengthen, supported by safe-haven demand and shifting investor positioning. Today sees a light economic calendar, so the focus will remain on US/Iran war updates and comments from central banks to help provide direction to currency markets.

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In the news. The US is to deploy more troops even as Trump praises Iran talks. NATO chief riles Europe by backing Trump's war in Iran. US sent Iran 15-point plan to end war, report says; Trump says 'in negotiations right now'. Iran says 'non-hostile' ships can transit the Strait of Hormuz. Lagarde says the ECB is ready to raise interest rates 'at any meeting'. UK inflation held steady at 3% in February before the energy shock. The US says it is working with Canada on permitting for the proposed partial revival of Keystone XL. Tracking technologies failed to prevent deadly LaGuardia collision, NTSB says. Denmark's Frederiksen faces tough coalition talks after the party's worst election result since 1903.

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In currency markets. Against the US Dollar, global currency markets remain under pressure, with cautious sentiment and geopolitical uncertainty favouring the greenback. The Australian Dollar weakens due to its sensitivity to global growth and China-linked demand, alongside softer domestic conditions and less supportive rate differentials. Meanwhile, the Norwegian Krone underperforms despite elevated oil prices, as broader risk aversion and equity market volatility weigh on the currency. Overall, high-beta currencies remain vulnerable as investors rotate toward safe-haven assets. CNY & Asian currencies on average slipped by 0.1% against the USD. Trading currencies remain under pressure, with NZD, AUD & NOK weakening 0.4%, KWD & CHF easing 0.2%, JPY, SEK, DKK, & PLN down 0.1%, and ZAR up 0.1% against the USD.

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In commodity markets. Oil prices tumble 5.3%. Natural Gas & Coffee prices weakened 1.5%. Gold prices strengthened 3.5%. Silver prices rallied 4.6%. Copper prices advanced 1.4%. Soybean prices firmed 0.3%, while Wheat prices retreated 1.3%.

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CAD continues to trade under selling pressure, testing fresh multi-month lows as markets favour the US Dollar amid heightened geopolitical uncertainty. Oil prices weakened overnight, adding further pressure to CAD and reinforcing downside momentum. The Loonie’s weakness reflects the broader risk-off environment, where safe-haven flows into the greenback dominate price action. Near-term, USD/CAD remains biased higher as geopolitical tensions continue to drive market direction.

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EURCAD firms toward 1.6000 as ECB rate-hike expectations support the Euro. Meanwhile, intraday weakness in oil prices weighs on the Canadian Dollar, reducing its commodity-driven support. The divergence in central bank outlooks keeps the near-term bias tilted higher.

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EUR maintains a defensive tone around 1.1600 as safe-haven demand supports the US Dollar amid ongoing Middle East uncertainty. Conflicting signals around potential ceasefire talks and continued escalation keep investors cautious, limiting upside for the pair, while ECB commentary highlighting higher near-term inflation provides some support to the Euro.

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GBPEUR holds steady near the 1.1550 area as both the Pound and the Euro remain weighed down by weaker-than-expected PMI data. Slowing activity across both economies, particularly in the services sector, highlights growing stagflation risks amid rising energy costs. With neither currency gaining a clear advantage, the cross remains range-bound, as markets await further policy signals and inflation data for direction.

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GBP straddles the 1.3400 level, holding a softer tone despite UK inflation data coming in broadly in line with expectations. While steady headline CPI and firmer core inflation offer some support to Sterling, gains are capped by a stronger US Dollar amid geopolitical uncertainty and rising Fed rate expectations. With markets increasingly pricing out rate cuts and even considering potential tightening, USD demand continues to dominate, keeping the near-term bias for the pound tilted to the downside.