The USD is steady, oil prices are tumbling, equity markets are up, and US yields are easing on US-Iran deal prospects. The U.S. dollar is holding steady but slightly softer against major peers as investors remain cautious over geopolitical developments and the broader global outlook. Market focus is now shifting toward key U.S. data releases later this week, including ADP employment figures, for further direction on Federal Reserve policy expectations. Global equity markets extended gains, with world and European stock indices reaching fresh record highs as easing geopolitical tensions improved investor sentiment. Optimism around a potential Iran agreement and continued enthusiasm for AI-driven technology stocks supported the rally. Investors remain focused on inflation risks and the outlook for central bank policy despite lighter holiday trading volumes. Despite lighter holiday trading volumes, optimism remained firm across markets, though investors continue to monitor inflation risks and the outlook for global central bank policy.
News Headlines. Rubio says Washington will find 'another way' if talks with Iran fail. US consumers face looming spending squeeze as Trump tax rebates fade. Republican hardliners warn Trump is giving up too much in Iran talks. Oil & LNG tankers exit the Strait of Hormuz, heading for Pakistan and China. Russia hits Ukraine with an Oreshnik missile in one of the war's biggest attacks on Kyiv. Stocks rally while oil and the dollar ease on hopes of Middle East peace. Echoes of Brexit as Alberta blunders towards a vote on separation from Canada. South Korea's first trans-Pacific submarine deployment reaches Canada.
In currency markets. Against the USD, currency markets rebounded as improving prospects for a potential Iran-U.S. agreement boosted risk appetite and reduced safe-haven demand for the greenback. The euro, pound, Australian dollar, and other major currencies firmed as investors cautiously rotated back into risk assets, while focus now shifts toward upcoming central bank decisions from the Fed, ECB, BoE, BoJ, and BoC for further direction.
In commodity markets. Oil prices tumbled 5.7%. Natural Gas & Coffee prices retreated 0.8%. Gold & Copper prices strengthened 1%. Silver prices rallied 2.9%, while Soybean & Wheat prices are flat.
CAD underperforms its G10 peers and remains near multi-week lows, despite modest support from improving prospects for a deal to reopen the Strait of Hormuz and easing geopolitical tensions. Tumbling oil prices, expectations that the Bank of Canada will keep rates on hold, and growing uncertainty surrounding Alberta separation discussions continue to weigh on sentiment toward the loonie.
EURCAD extended gains as the euro strengthened against a softer Canadian dollar, with lower oil prices weighing on the commodity-linked loonie. Improving sentiment around a potential U.S.-Iran agreement eased supply concerns and reduced support for crude prices. Meanwhile, expectations for further ECB tightening amid persistent inflation pressures continued to underpin the euro.
EUR strengthened against the U.S. dollar, with the single currency pushing back toward the 1.1650 level as improving sentiment around potential U.S.-Iran negotiations initially supported risk appetite and weighed on the greenback. However, gains moderated later in the session as markets turned more cautious amid uncertainty over whether a formal agreement will materialize, reviving some safe-haven demand for the USD.
GBPEUR strengthened toward multi-week highs as sterling outperformed despite weaker-than-expected UK retail sales data. The euro remained under pressure even after stronger-than-expected German GDP and business sentiment figures, with investors focused instead on risks of slowing Eurozone growth, rising inflation concerns, and cautious comments from ECB President Christine Lagarde.
GBP is consolidating just below 1.3500, with sterling remaining one of the strongest-performing G10 currencies amid resilient UK fundamentals and reduced expectations for aggressive Bank of England easing. The U.S. dollar has regained some stability on cautious market sentiment, though the broader backdrop continues to support the pound relative to many of its major peers. Near-term direction for the pair is likely to remain tied to broader risk sentiment and shifting Federal Reserve expectations.
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