The Morning Update

The USD steadies, oil prices rebound, equity markets are down, and US yields rise as doubts about the Iran truce grow. The U.S. dollar has steadied following recent volatility but remains directionless as markets focus on geopolitical developments in the Middle East. A fragile U.S.–Iran ceasefire and ongoing regional tensions are keeping sentiment cautious, with oil disruptions adding further uncertainty. In the near term, the dollar is likely to remain sensitive to headlines, with continued potential for short-term volatility. Global equity markets have moved lower as investors remain cautious over the fragile U.S.–Iran ceasefire and ongoing geopolitical tensions. Concerns around potential disruptions to energy supply and rising oil prices are weighing on risk sentiment across regions. As a result, markets are trading defensively, with continued volatility expected while uncertainty persists. Elsewhere, oil prices have strengthened on concerns over the fragile U.S.–Iran ceasefire and potential supply disruptions, while bitcoin has remained relatively steady amid broader market uncertainty. Meanwhile, gold prices have eased following recent gains as markets adjust to shifting sentiment and macro expectations. Focus today will be on the key US Core Personal Consumption. Expenditures - Price Index, which is the preferred gauge of inflation for the Fed. Investors will also be focused on the US GDP and Initial Jobless claims to help provide direction to currency markets.

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News Headlines. Europeans say ceasefire must include Lebanon. Shipping stalls as Tehran dictates terms in the Strait of Hormuz. US oil exports to hit record as Iran war triggers race for supplies. The EU will still be hit by 'stag-flationary shock', Brussels warns. 7-Eleven owner delays US listing in blow to turnaround plan. Iran demands crypto fees for ships passing Hormuz during the ceasefire. Vance to lead US talks with Iran as Israeli strikes imperil ceasefire. Saudi Arabia's key east-west oil pipeline hit as Middle East energy attacks continue. Liberals descend on Montreal for convention on the cusp of a majority government. Air Canada is testing a new program to resolve customer complaints.

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In currency markets. Against the U.S. dollar, the Norwegian krone has strengthened, supported by firmer oil prices and cautious risk sentiment. In contrast, the Chinese yuan has eased slightly, reflecting softer domestic conditions and ongoing policy management. CNY and Asian currencies eased 0.2% on average against the USD. Trading currencies are mixed, with ZAR & JPY eased 0.2%, KWD, AUD, SEK, DKK & CZK down 0.1%, PLN, MXN & CHF flat, and NZD up 0.15% against the USD.

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In commodity markets. Oil prices rallied 3.9%. Natural Gas & Soybean prices firmed 0.25%. Gold prices retreated 0.6%. Silver prices tumbled 1.8%. Copper prices eased 1.25%. Coffee prices eased 0.35%, and Wheat prices strengthened 1.25%.

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CAD holds steady near recent two-week highs as markets reassess the durability of the U.S.–Iran ceasefire. Risk sentiment has softened amid signs the truce remains fragile, with ongoing geopolitical uncertainty weighing on markets. Despite firmer oil prices, the loonie has struggled to extend gains, suggesting broader risk dynamics are driving price action. Focus now turns to today’s U.S. PCE data alongside further developments in the Middle East, which are expected to guide near-term direction.

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EURCAD firms in early trading, with the euro holding ground despite firmer oil prices that would typically support the Canadian dollar. Softer Canadian economic conditions and expectations of policy divergence between the ECB and Bank of Canada continue to underpin the euro. Ongoing geopolitical uncertainty is weighing on risk sentiment, limiting CAD upside.

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EUR holds within its recent range above 1.1650, supported by a softer U.S. dollar and a still-dovish Federal Reserve outlook. Ongoing uncertainty around the Middle East ceasefire continues to limit USD recovery, helping keep the pair supported near recent highs. However, upside momentum remains modest, with the broader trend still capped by resistance levels. Focus now turns to upcoming U.S. PCE inflation data and geopolitical developments for further direction.

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GBPEUR softens in early trading, with sterling edging lower as the euro remains supported despite weaker German industrial production data. Expectations of a more hawkish ECB, in contrast to a more cautious Bank of England, continue to favour the euro. In the near term, focus will turn to upcoming Eurozone inflation data and evolving central bank expectations for further direction.

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GBP holds steady around 1.3400 in early trading, with the pair consolidating recent gains as markets turn more cautious. Uncertainty around the durability of the U.S.–Iran ceasefire is weighing on sentiment, limiting further upside in sterling. Focus now shifts to today’s U.S. PCE data and broader geopolitical developments, which are expected to guide near-term direction.