The Morning Update

The USD steadies, oil prices slip, equity markets advance, and US yields are mixed ahead of key inflation data. The U.S. dollar steadied and remained on track for its biggest weekly gain since October, supported by stronger-than-expected economic data, a slightly more hawkish tone in Fed minutes, and rising U.S.-Iran tensions that boosted safe-haven demand. The dollar index is up more than 1% this week, with investors now focused on Friday’s core PCE inflation report and advance Q4 GDP data for further direction. Global equities advanced as investors downplayed escalating U.S.-Iran tensions and shifted focus toward upcoming U.S. economic data. S&P 500 futures rose 0.2%, recovering from the prior session’s losses, as markets proved resilient despite earlier oil-driven volatility and geopolitical uncertainty. Traders are now watching U.S. GDP and core PCE data for the next catalyst, with sentiment remaining broadly constructive across equity markets. Elsewhere, oil prices have slipped modestly after recent rallies, while gold has strengthened as investors continue to seek safe havens amid mixed economic signals. Bitcoin has edged higher and is retesting resistance near $68,000, but remains capped below that key level as broader macro and liquidity conditions temper upside momentum. In focus today are the Core PCE Price Index, US GDP, S&P Global Manufacturing & Services PMI, and CAD Retail Sales, which will help provide direction to currency markets.

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In the news. Investors pour record sums into European stocks. NVIDIA and OpenAI abandon unfinished $100bn deal in favour of $30bn investments. North Korea's Kim Jong Un triumphant at rare congress. Trump gives Iran 15 days to strike a deal or 'bad things will happen'. Police continue the search of Andrew Mountbatten-Windsor's former home. The US and Indonesia finalize trade deal to cut tariffs. The US amasses its biggest force since 2003 as Trump pushes Iran on the deal. Canada's Alberta to hold referendum on new restrictions for immigrants. US tariff revenue at risk in Supreme Court ruling tops $175 billion, Penn-Wharton estimates.

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In currency markets. Currency markets were largely sidelined ahead of key U.S. data releases, keeping major pairs in tight ranges against the dollar. The Japanese yen initially weakened after data showed core inflation slowed to 2.0% in January — the slowest pace in two years — but later recouped its losses to trade broadly flat, while the New Zealand dollar headed for a weekly decline of around 1.3% amid a dovish Reserve Bank of New Zealand outlook. CNY is up 0.1%, while Asian currencies are flat on average against the USD. Trading currencies are steady, with NZD & NOK down 0.2%, Chf, KWD, CZK & PLN eased 0.1%, JPY, AUD, SEK, & DKK flat, MXN up 0.1%, and MXN firmed 0.2% against the USD.

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In commodity markets. Oil prices eased 0.5%. Natural Gas prices weakened 1.1%. Gold prices strengthened 1%. Silver prices rallied 3.95%. Copper prices up 0.3%. Coffee prices gained 0.5%. Soybean prices slipped 0.25%, while Wheat prices advanced 0.6%.

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CAD steadied below the 1.3700 level after touching a multi-week low, supported by firmer oil prices and data showing Canada’s trade deficit narrowed in December. Despite the rebound, the loonie remains pressured by broader U.S. dollar strength and lingering trade uncertainty. Markets are now focused on upcoming U.S. core PCE inflation and GDP data, alongside Canada’s Retail Sales report, for the next directional cue.

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EURCAD is holding steady above the 1.6100 level in early trading, as modest euro resilience offsets support for the Canadian dollar from firmer oil prices and a narrowing trade deficit. With both currencies awaiting key U.S. core PCE data and broader risk developments, the cross remains range-bound near recent levels.

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EUR is holding steady in early trading, trading above the 1.1750 level despite mixed February PMI readings from Germany and the broader Eurozone. However, the pair continues to struggle for upside momentum as the U.S. dollar remains supported by a hawkish Fed tone and heightened geopolitical tensions. Focus now shifts to U.S. Q4 GDP and core PCE inflation data later today, which could determine whether the pair stabilizes or extends its recent slide.

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GBPEUR edged higher in early trading, climbing above the 1.1450 level after UK Retail Sales surged 1.8% month-on-month in January, well above expectations. The stronger consumer data supported sterling, while ECB President Christine Lagarde’s comments that she intends to serve through 2027 steadied the euro but did little to prevent gains in favour of the pound.

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GBP edges higher in early trading after UK flash PMI data showed business activity expanding at its fastest pace since April 2024, signalling a solid start to the year for the economy. The Composite PMI rose to 53.9, pointing to continued growth despite ongoing weakness in the labour market. Sterling also drew support from stronger retail sales figures, though gains remain cautious ahead of key U.S. core PCE inflation data later today.