The Morning Update

The USD is flat, oil prices are tumbling, equity markets are up, and US yields are mixed amid Iran-US optimism. The U.S. dollar steadied in early trading as investors weighed prospects for a potential U.S.-Iran peace agreement and the reopening of the Strait of Hormuz. The euro remained supported following the ECB's rate hike, while the yen hovered near intervention-sensitive levels. Markets are now focused on next week's Federal Reserve meeting, with expectations that higher U.S. interest rates will continue to support the dollar. Global equity markets traded higher in early trading as easing concerns over a potential U.S.-Iran peace agreement supported risk appetite and reduced demand for traditional safe-haven assets. Technology shares led gains, with investor attention focused on the highly anticipated SpaceX IPO, expected to be the largest public listing in history, which has helped lift sentiment across growth and AI-related sectors. Elsewhere, oil prices tumbled on hopes that a U.S.-Iran peace agreement could reopen the Strait of Hormuz and ease supply concerns. Gold prices rallied as investors sought protection against ongoing geopolitical uncertainty, while bitcoin traded broadly flat as markets awaited further developments on both the geopolitical and interest rate fronts. Today sees a light economic calendar, with focus on the US Michigan Consumer Sentiment Index to help provide intraday direction to currency markets.

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News Headlines. Musk's SpaceX raises $75bn in World's biggest IPO. Oil prices sink to a three-month low after Trump says the US is close to an Iran deal. ECB stands ready to raise rates again, says Bundesbank boss. European defence stock rally goes into reverse on funding concerns. Chinese investors rush to open Hong Kong accounts amid Beijing crackdown. Asia energy crisis at 'worst' cast scenario, ADB warns. Thursday, the ECB raised interest rates for the first time since 2023. Canada agreed to delay the opening of the Detroit-Windsor bridge following a US request, Carney says. Canada pledges to boost food sector as grocery costs rise.

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In currency markets. Against the U.S. dollar, major currencies traded in relatively narrow ranges as investors looked ahead to next week's Federal Reserve interest rate decision. While easing hopes surrounding a potential U.S.-Iran peace agreement provided some support for risk sentiment, markets remain cautious as expectations for higher U.S. interest rates continue to underpin the greenback. The euro held near recent highs following the ECB's rate hike, while the yen remained close to intervention-sensitive levels ahead of next week's Bank of Japan meeting.

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In commodity markets. Oil prices tumble 4%. Natural Gas prices weakened 1.1%. Gold prices strengthened 3.2%. Silver prices rallied 5.25%. Copper prices advanced 2.25%. Coffee prices are flat. Soybean prices slipped 0.2%, and Wheat prices eased 0.8%.

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CAD found modest support in early trading after recent heavy selling pressure pushed it to its weakest level of 2026 against the U.S. dollar. However, the loonie remains under pressure as widening Canada-U.S. yield differentials, a cautious Bank of Canada outlook, and recent weak domestic economic data continue to weigh on sentiment. While stronger Canadian employment data has offered some support, softer oil prices, ongoing trade uncertainty, and investor caution ahead of next week's Federal Reserve interest rate decision are expected to limit any meaningful recovery.

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EURCAD inched higher towards 1.6200 in early trading as the euro remained supported by the ECB's recent rate hike and expectations that policymakers could tighten policy further if inflation pressures persist. Meanwhile, the Canadian dollar remained on the defensive following the Bank of Canada's decision to leave rates unchanged and maintain a cautious policy stance. As a result, the divergence in policy expectations continues to underpin the cross near its highest levels of the year.

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EUR holds steady below 1.1600 in early trading as the U.S. dollar recovers modestly amid lingering uncertainty surrounding U.S.-Iran negotiations and renewed safe-haven demand. The single currency remains supported by Thursday's ECB rate hike and expectations that policymakers could tighten policy further if inflation pressures persist. However, investor caution ahead of next week's Federal Reserve meeting is helping to limit further gains in the euro.

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GBPEUR traded broadly flat in early trading as UK GDP contracted by 0.1% in April, in line with expectations, while stronger manufacturing data helped offset some concerns about economic growth. Sterling remained supported by expectations that the Bank of England could begin raising interest rates as early as September, with markets pricing in the possibility of further tightening before year-end. Meanwhile, the euro found support from the ECB's recent rate hike and broadly stable German inflation data.

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GBP held steady above 1.3400 against the U.S. dollar in early trading, with weaker-than-expected UK GDP data offset by growing expectations that the Bank of England may need to maintain a hawkish stance if energy-driven inflation pressures persist. The pound also found support from broader U.S. dollar weakness, although ongoing tensions in the Middle East continue to underpin safe-haven demand for the greenback. Investors are now focused on the University of Michigan consumer sentiment survey for further clues on the U.S. economic outlook ahead of next week's Federal Reserve meeting.