The Morning Update

The USD holds steady, oil prices fall, equity markets are up, and US yields remain mixed as markets remain cautious on the Iran-US truce. The U.S. dollar held steady as investors closely monitored developments in the Iran conflict, with renewed geopolitical uncertainty continuing to support safe-haven demand for the greenback. Markets remain cautious after U.S. strikes on Iran dampened hopes for a near-term agreement, while traders also kept a close watch on USD/JPY as it approached the 160 level, which previously triggered Japanese intervention. Global equity markets were mostly higher, with U.S. futures and several major markets supported by cautious optimism that U.S.-Iran negotiations could still progress despite renewed military tensions. However, investor sentiment remained restrained as markets continued to monitor fresh U.S. strikes on Iran and the risk of further escalation in the region. Elsewhere, oil prices continue to weaken as investors remain cautiously optimistic that U.S.-Iran negotiations could eventually lead to the reopening of the Strait of Hormuz and an easing in supply disruptions. Gold and bitcoin prices also slipped as safe-haven demand moderated and investors reduced defensive positioning across commodity and digital asset markets. Today sees another light economic calendar, with a focus on the US ADP Employment Change, so expect investors to remain sidelined ahead of Thursday's key US inflation report.

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News Headlines. Trump risks triggering a financial crisis with the Iran war, warns the ECB. Hong Kong overtakes Switzerland as a hub for global offshore wealth. China overhauls the world's biggest surveillance network with advanced AI. Russia 'relentlessly targeting' critical infrastructure and democracy, GCHQ says. Iran accuses US of 'flagrant' ceasefire violations as back-channel talks continue. Senior Ukrainian commander sees imminent 'turning point' in war.

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In currency markets. Against the USD, major currencies traded mixed as renewed geopolitical uncertainty surrounding Iran supported safe-haven demand for the U.S. dollar. The Japanese yen remained under pressure near intervention-sensitive levels around 160, while the New Zealand dollar outperformed after the RBNZ signalled the potential for earlier and larger rate hikes, and the Australian dollar weakened following softer inflation data, reducing expectations for further tightening. Germany and Canada to sign major LNG deal as Europe seeks energy security. Scotiabank beats estimates on its Canadian and international units.

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In commodity markets. Oil prices tumble 4%. Natural Gas prices retreat 0.8%. Gold prices slip 0.4%. Silver & Wheat prices weaken 1.1%. Coffee prices advanced 1%. Copper & Soybean prices are up 0.15%.

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CAD edged lower against the U.S. dollar, with USD/CAD holding above 1.3800 as investors looked ahead of Friday's Canadian GDP data for clearer direction on the domestic economy. Softer oil prices, ongoing geopolitical uncertainty surrounding Iran, and expectations that the Bank of Canada will remain on hold continue to keep underlying pressure on the loonie.

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EURCAD continues to edge higher toward the 1.6100 level, with the broader outlook remaining supportive for further gains in the pair. Expectations of continued ECB-BoC policy divergence, weakening oil prices, and ongoing uncertainty surrounding Alberta separation discussions continue to weigh on the Canadian dollar while underpinning the euro.

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EUR holds steady in early trading, with investors remaining cautious ahead of Thursday’s key U.S. inflation report, which could provide further direction for Federal Reserve policy expectations. Renewed Middle East tensions and lingering uncertainty surrounding U.S.-Iran negotiations are also limiting upside momentum, keeping safe-haven demand for the U.S. dollar supported.

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GBPEUR edged lower in early trading as the euro found support from increasingly hawkish ECB commentary and growing expectations for a June interest rate hike. Meanwhile, softer UK economic data, easing political concerns, and reduced expectations for further Bank of England tightening continued to limit support for sterling.

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GBP holds a modestly positive tone near the 1.3450 level as softer U.S. dollar trading offers some support to sterling in early trading. However, renewed geopolitical tensions in the Middle East, ongoing uncertainty surrounding U.S.-Iran negotiations, and expectations for the Federal Reserve to maintain a relatively hawkish stance continue to limit upside momentum for the pair.