The USD firms, oil prices slip, while equity markets and US yields are mixed, amid caution ahead of earnings season and the Fed minutes. The U.S. dollar is edging higher in early trading, supported by modest gains in Treasury yields as investors look ahead to this week's Federal Reserve minutes and the start of the U.S. earnings season. While last week's softer U.S. jobs data tempered expectations for further rate hikes, markets continue to price the possibility of one additional Fed increase later this year, providing underlying support for the greenback. U.S. equity futures are trading higher in early trading, while Asian and European markets are mixed as investors assess last week's softer U.S. jobs data and look ahead to the release of the Federal Reserve meeting minutes later this week. Market sentiment remains cautiously constructive, with investors favouring selective risk-taking ahead of the start of the second-quarter earnings season. Elsewhere, oil prices are slipping after OPEC+ agreed to increase production, while gold is firmer on lower Treasury yields and easing rate expectations. Bitcoin is easing slightly as investors take profits following recent gains. Focus will be on the US Services PMI report, the BoC Business Outlook Survey, and comments from ECB President Lagarde, and other speakers from the BoE, ECB & Fed to guide currency markets.
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In currency markets. Against the U.S. dollar, both the Swiss franc and Japanese yen are weaker in early trading as higher U.S. Treasury yields and expectations the Federal Reserve could maintain a hawkish bias support the greenback. The yen remains under pressure from the wide interest rate differential between the U.S. and Japan, while the franc is also easing as investors favour the dollar amid renewed carry-trade demand.
In commodity markets. Oil -0.47% | Nat Gas +1.16% | Gold +0.85% | Silver +2.44% | Copper +0.88% | Palladium +0.51% | Coffee +1.15% | Cocoa +3.42% | Soybeans +2.91%
CAD is softer in early trading, with the loonie moving back above 1.4200 as investors remain cautious ahead of this week's Bank of Canada Business Outlook Survey and Canadian trade data. Ongoing uncertainty surrounding the CUSMA (USMCA) review and expectations that the Bank of Canada is less likely to raise interest rates in the near term continue to weigh on the loonie, and weakening oil prices could add to further losses.
EUR/CAD is holding steady near five-month highs as the euro continues to benefit from relative resilience while the Canadian dollar remains under pressure from softer domestic fundamentals and uncertainty surrounding the CUSMA (USMCA) review. The medium-term bias remains for further EUR/CAD strength, although the longer-term outlook will depend on the outcome of trade negotiations and whether confidence in the Canadian economy improves.
EUR retreats in early trading, easing back toward 1.1400 as a modest recovery in the U.S. dollar and lingering geopolitical tensions in the Middle East support demand for the greenback. However, weaker-than-expected U.S. employment data has tempered expectations for further Federal Reserve rate hikes, while investors also await Eurozone retail sales, U.S. ISM Services PMI and comments from Federal Reserve officials for fresh direction.
GBPEUR is holding firm in early trading despite stronger-than-expected Eurozone economic data, as confidence in the pound remains supported by Andy Burnham's commitment to maintain the UK's fiscal rules. While political uncertainty persists, sterling continues to outperform the euro, with any near-term downside likely to depend on changes in Bank of England rate expectations.
GBP is holding steady, straddling the 1.3350 level against the U.S. dollar in early trading as investors balance a modestly firmer greenback against expectations for Bank of England policy. Later today, markets will focus on the U.S. ISM Services PMI, comments from Federal Reserve Governor Christopher Waller, and a speech from Bank of England policymaker Catherine Mann for further direction.
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