The Morning Update

The USD eases, oil prices rally, equity markets are mixed, and US yields rise as Iran-US escalate attacks. The U.S. dollar is easing slightly in early trading despite renewed escalation between the U.S. and Iran, as markets remain reluctant to build fresh safe-haven positions following the greenback’s recent gains. Investors are now looking ahead to this week’s U.S. inflation data and Federal Reserve Chair Kevin Warsh’s congressional testimony for clearer direction on the interest-rate outlook. Global equity markets are mostly lower in early trading as a sharp selloff in South Korean semiconductor stocks raises fresh concerns that the AI-driven rally has become overstretched. U.S. futures are weaker, led by the Nasdaq, while escalating U.S.-Iran hostilities and higher oil prices add to risk aversion ahead of U.S. inflation data, Fed Chair Kevin Warsh’s congressional testimony and the start of bank earnings season. Elsewhere, oil prices are rallying and remain on track for further gains as renewed U.S.-Iran hostilities raise concerns over potential supply disruptions through the Strait of Hormuz. Gold and Bitcoin are both retreating as higher oil prices fuel inflation concerns, reinforcing expectations that central banks could keep interest rates higher for longer. In focus today: Markets will be watching the U.S. monthly budget statement, along with speeches from Bank of England, Federal Reserve and European Central Bank policymakers, for fresh signals on the interest rate outlook and direction for currency markets.

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News Headlines. Global stocks fall as Asian memory chipmakers hammered. The US launches more strikes on Iran as ceasefire teeters. EU buys record amount of gas from Russia's flagship plant. Deutsche Bank and UniCredit sue Linde over Russia sanctions losses. Nippon Paint offers Eur 7.5 billion for Akzo unit in attempt to gatecrash rival deal. Chinese EV makers are outpacing US automakers in overseas investments. TSMC, the world's largest contract chipmaker, reports 68% surge in June revenue. 'Good deal for Canada' PM Carney insists not a lot of profits to split with US on Gordie Howe Bridge.

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In currency markets. Against the U.S. dollar, G10 currencies are mixed but holding within relatively tight trading ranges as investors await Federal Reserve Chair Kevin Warsh's congressional testimony and this week's key U.S. inflation data. Markets remain cautious, with geopolitical tensions in the Middle East supporting the U.S. dollar, while traders look for fresh guidance on the Fed's interest rate outlook.

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In commodity markets. Oil +2.80% | Nat Gas -1.50% | Gold -0.90% | Silver -2.15% | Copper -0.40% | Palladium +0.30% | Coffee -1.85% | Cocoa -9.30% | Soybeans +0.60% | Wheat -0.50%

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CAD is holding steady in early trading after posting its first weekly gain in six weeks, supported by stronger-than-expected employment data that has eased concerns over Canada's growth outlook. Attention now turns to Wednesday's Bank of Canada interest rate decision, where policymakers are widely expected to leave the overnight rate unchanged at 2.25%, alongside the Monetary Policy Report, which will provide updated guidance on inflation and growth.

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EURCAD is flat in early trading despite escalating oil prices, as markets remain cautious ahead of Wednesday’s Bank of Canada interest-rate decision. The BoC is widely expected to keep rates unchanged and maintain a wait-and-see stance as policymakers assess inflation, growth and trade uncertainty.

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EUR is flat in early trading, holding above the 1.1400 level as investors balance escalating U.S.-Iran attacks against expectations that diplomatic efforts could still prevent a broader regional conflict. Markets are now focused on this week's U.S. CPI report and Federal Reserve Chair Kevin Warsh's congressional testimony, while comments from ECB policymakers are expected to reinforce the central bank's data-dependent, meeting-by-meeting approach to monetary policy.

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GBPEUR is holding firm near one-year highs as sterling continues to outperform the euro despite escalating Middle East tensions. Expectations that the Bank of England will maintain a more restrictive policy stance than the European Central Bank, together with improving UK political stability under incoming Prime Minister Andy Burnham, continue to support the pound against the single currency.

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GBP is holding steady just below 1.3400 against the U.S. dollar in early trading, with investors looking to comments from Bank of England Chief Economist Huw Pill later today for fresh guidance on the UK interest-rate outlook. Pill has recently reiterated that UK interest rates are likely to rise further, arguing that inflation remains too persistent and that the economy has been running "hotter than the supply side," reinforcing expectations that the BoE will maintain a relatively hawkish stance.