The Morning Update

The USD eases, oil prices firm, equity markets are mixed, and US yields rise as investors' focus turns to central banks amid ongoing Mideast unrest. The dollar pulled back slightly on Monday but remained close to a 10-month high as investors prepared for a busy week of central bank meetings held against the backdrop of the ongoing Middle East war. The Federal Reserve, European Central Bank, Bank of Canada, Bank of England and Bank of Japan are all set to meet, with markets watching how policymakers assess the impact of soaring oil prices on inflation and economic growth. While safe-haven demand has supported the dollar since the conflict began, traders are taking a cautious stance ahead of policy decisions and guidance from major central banks. Global equities showed a mixed performance, with U.S. stock futures edging higher, European markets trading lower, and Asian markets delivering mixed results as investors assessed geopolitical risks and rising energy prices. Asian markets saw gains in some indices but declines in others, while European stocks slipped amid inflation concerns linked to oil prices above $100 a barrel. Meanwhile, U.S. futures moved modestly higher as investors looked ahead to key central bank meetings and economic data for further direction. Elsewhere, oil prices remained firm above $100 a barrel as the Middle East conflict continued to threaten global supply routes and fuel inflation concerns. Meanwhile, gold prices weakened while Bitcoin rallied above $73,000, with the cryptocurrency outperforming several traditional assets during the recent market volatility. Today's focus will be on the CAD inflation report, US Industrial Production and the Australian interest rate decision to help provide intraday direction to currency markets.

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In the news. Trump warns NATO faces 'very bad future' if allies fail to help US in Iran. Oil prices climb as tensions in the Strait of Hormuz persist. Belgian Prime Minister calls for the EU to normalize ties with Russia. China's 30-year yields set for highest close since 2024 on oil. Venezuela's 600% inflation undercuts Trump's boasts of revival. Iran war reawakens global inflation fears. US and Mexico launch review of trade deal with Canada. Zelensky challenges Europe over Russian oil imports. Canada and the Nordics focus on military procurement in a 'middle-power' meet-up. UAE port hit in strikes, Trump presses allies on Hormuz.

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In currency markets. Against the U.S. dollar, the Australian dollar strengthened on expectations that the Reserve Bank of Australia could raise interest rates this week. The Japanese yen edged higher after recent weakness, though it remains pressured by Japan’s reliance on Middle East energy imports and uncertainty over the Bank of Japan’s policy outlook. Meanwhile, the New Zealand dollar advanced while China’s yuan held steady as investors assessed stronger Chinese economic data and ongoing U.S.–China trade talks. CNY is flat, while Asian currencies firmed by an average of 0.15% against the USD. Trading currencies rebounded, with KWD flat, JPY & CHF up by 0.25%, CZK & DKK firmed by 0.35%, PLN & NOK gained 0.5%, MXN & ZAR advanced 0.6%, SEK & AUD strengthened by 0.8%, and NZD rallied 1.2% against the USD.

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In commodity markets. Oil prices firmed 0.15%. Natural Gas & Copper prices slipped 0.5%, Gold prices retreated by 1.6%. Silver prices tumbled by 4.7%. Coffee prices fell 0.9%. Soybean prices weakened 2.4%, and wheat prices dropped 0.7%.

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CAD holds steady near six-week lows against the U.S. dollar and continues to underperform most of its G10 peers following weaker domestic data, softer oil prices and geopolitical uncertainty. The currency came under pressure after a sharp decline in Canadian employment raised doubts about the strength of the domestic economy and reduced expectations for near-term policy tightening. Attention now turns to a busy week for the loonie, with investors closely watching today’s Canadian inflation report and Wednesday’s Bank of Canada interest rate decision for further guidance on the policy outlook.

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EURCAD strengthened above 1.5700 as the euro gained against the Canadian dollar amid softer oil prices and concerns over a weakening Canadian economic outlook. Investors are now focused on today’s Canadian inflation report and this week’s Bank of Canada and European Central Bank interest rate decisions for further direction.

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EUR broke through 1.1450 as the U.S. dollar softened, with investor attention shifting toward this week’s policy meetings from the Federal Reserve and the European Central Bank. Markets will be looking for guidance from policymakers on how rising energy prices and the ongoing Middle East conflict could impact inflation and the global growth outlook. However, persistent geopolitical tensions may continue to underpin safe-haven demand for the dollar, potentially limiting further upside for the pair.

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GBPEUR slipped in early trading as the pound weakened against the euro, with the cross testing key support levels after recent losses. This week's focus this week will be on the Bank of England and European Central Bank interest rate decisions, which could provide further direction for the pair.

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GBP moved higher above 1.3250 as the U.S. dollar softened, though the pair remains near its lowest levels since December. Investors are turning cautious ahead of this week’s Federal Reserve and Bank of England policy meetings, where both central banks are widely expected to keep interest rates on hold. Markets will also assess policymakers’ guidance on inflation and growth risks amid rising energy prices and ongoing geopolitical tensions in the Middle East.