The USD rebounds, oil prices rally, equity markets are down, and US yields are mixed as hopes for a swift end to the Iran war dim. The U.S. dollar strengthened sharply after renewed escalation in the Iran conflict revived safe-haven demand, reversing earlier losses tied to ceasefire hopes. The greenback rallied broadly as investors moved out of risk assets, with rising oil prices and inflation concerns reinforcing expectations for a more hawkish Fed. Focus now turns to Friday’s U.S. jobs report, which will be key in shaping the outlook for monetary policy and determining whether the dollar can extend its gains. Global equities are under pressure, with stocks falling across regions as renewed escalation in the Middle East drives oil prices sharply higher. The surge in crude is reigniting inflation concerns and prompting markets to scale back expectations for central bank easing, weighing on both equities and bonds. With no clear resolution to the conflict, sentiment remains fragile, and markets are increasingly sensitive to energy prices and geopolitical developments. Elsewhere, oil prices are strengthening as renewed geopolitical tensions and supply risks drive energy markets higher. Meanwhile, gold and bitcoin are weakening as rising inflation fears and expectations of tighter monetary policy weigh on non-yielding and risk-sensitive assets. Today's focus will be on US Challenger Job Cuts & Initial Jobless Claims, ahead of Friday's key US NDF report, to provide direction for the currency market.
News Headlines. Trump threatens to hit Iran 'extremely hard' in the coming weeks. Oil prices jump 7% as Trump's speech revives anxiety about a conflict with Iran. Gulf states consider new pipelines to avoid the Strait of Hormuz. Trump threatened to stop weapons for Ukraine unless Europe joined the Hormuz coalition. Arms makers eye windfall as war drains stockpiles. SpaceX filing kicks off the largest IPO process in history. Global central banks are mostly on hold as war muddies the economic outlook. Stellantis in talks to build Chinese EVs at Canadian plant. Bank of Canada says it will rely on judgement more than usual for rate decisions.
In currency markets. Against the U.S. dollar, both the Australian dollar and Japanese yen are weakening as safe-haven demand for the greenback returns amid rising geopolitical tensions. The Aussie is under pressure as a proxy for global growth, reflecting a broader risk-off shift in markets. Meanwhile, the yen is approaching key intervention levels near 160, with persistent yield differentials and energy costs continuing to weigh on the currency. CNY & Asian currencies eased 0.35% on average against the USD. Trading currencies comes under renewed pressure, with ZAR tumbling 0.9%, AUD, CHF, PLN, NZD & CZK weakening 0.75%, JPY, MXN & DKK retreat 0.6%, and NOK slipping 0.2% against the USD.
In commodity markets. Oil prices rallied 7.5%. Natural Gas & Wheat prices strengthened 1.3%. Gold prices weakened 3.5%. Silver prices tumbled 6.3%. Copper prices 1.6%. Coffee prices eased 0.7%, and Soybean prices firmed 0.3%.
CAD retreats above 1.3900 as renewed risk-off sentiment supports the U.S. dollar following fading hopes of Middle East de-escalation. The pair is approaching recent highs, with broader USD strength and higher Treasury yields reinforcing the move. However, upside may be limited as rising oil prices provide some support to the Canadian dollar, keeping the pair near key resistance levels. With no key CAD economic data releases, the loonie will remain focused on updates on the Iran war and Friday's key US jobs report for short-term direction.
EURCAD is easing in early trading following Trump’s comments, as renewed geopolitical uncertainty shifts sentiment. The Canadian dollar is finding support from rising oil prices, helping offset broader market volatility. Overall, the pair is pulling back from recent highs, with energy dynamics driving near-term direction.
EUR is under renewed pressure, testing 1.1450 as a stronger U.S. dollar weighs on the pair amid a deteriorating risk backdrop. The move follows Trump’s latest comments on the Iran conflict, which have dampened hopes for a swift resolution and revived demand for safe-haven assets. While technical indicators suggest some near-term support, the broader outlook remains fragile, with U.S. data and Fed signals likely to drive the next move.
GBPEUR edges lower as expectations for aggressive Bank of England tightening are scaled back following pushback from Governor Bailey. Weaker labour market conditions and limited pricing power are reducing the likelihood of multiple rate hikes. As a result, the cross is expected to be biased higher over the coming months.
GBP tumbles through the 1.3200 level as renewed U.S. dollar strength and a deteriorating risk backdrop weigh on the pair. The move is amplified by comments from BoE Governor Bailey, who pushed back against aggressive rate hike expectations, prompting a reassessment of the UK policy outlook. His remarks highlight concerns around weakening growth and limited pricing power, reducing the likelihood of further tightening. With safe-haven demand supporting the dollar and BoE expectations softening, downside risks for the pound remain elevated in the near term.
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