The Morning Update

The USD is steady, oil prices remain under pressure, equity markets are up, and US yields are mixed as the Hormuz stalemate continues. USD stalls near six-week highs as improving hopes for a potential U.S.–Iran agreement temper safe-haven demand for the dollar. Despite this, the greenback remains supported by elevated Treasury yields and expectations that the Fed may keep rates higher for longer amid persistent inflation concerns. Markets continue to monitor developments in the Middle East and the impact of elevated energy prices on the Fed’s policy outlook. Global equities are higher, led by gains in Asian technology shares, while US and European markets trade cautiously firmer. Investor sentiment remains supported despite Nvidia's earnings failing to fully reignite the AI rally, though ongoing uncertainty surrounding Middle East peace negotiations keeps oil prices elevated and volatility in focus. Markets also remain sensitive to inflation and interest-rate risks, with bond yields holding near multi-year highs. Elsewhere, oil prices opened steady after tumbling more than 5% in the previous session, as easing concerns over immediate supply disruptions in the Middle East helped calm energy markets. Meanwhile, gold and Bitcoin prices edged higher as investors cautiously returned to defensive and alternative assets amid ongoing geopolitical uncertainty and elevated market volatility. In focus today, the US S&P Global PMI reports, EU Consumer Confidence, US Housing Starts, and Initial Jobless claims will help drive intraday direction in currency markets.

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News Headlines. DR Congo races to halt the spread of Ebola. Oil dropped nearly 6% on Wednesday as two China-bound supertankers crossed the Strait of Hormuz. Elon Musk's SpaceX sets out plans for the biggest IPO in history. The EU cuts growth forecasts as the war in Iran drives up inflation. Net migration to the UK falls to the lowest level since 2021. NVIDIA says it has 'largely conceded' China's AI chip market to Huawei. Iran reviews US peace proposal as Trump says he's willing to wait 'a few days'. Carney says the world is facing an 'energy crisis' and Canada must help solve it. The Supreme Court of Canada is to decide whether to hear BC's appeal in the mineral claim case.

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In currency markets. Against the USD, currency markets are steady as investors balance easing Middle East tensions against persistent inflation concerns and elevated US Treasury yields. The dollar continues to find underlying support from expectations that the Federal Reserve may keep interest rates higher for longer, while cautious risk sentiment limits broader FX volatility.

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In commodity markets. Oil, Silver, & Soybean prices retreated 0.6%. Natural Gas prices firmed 0.3%. Gold prices flat. Copper prices weakened 0.8%. Coffee prices down 0.2%, and Wheat prices tumbled 1.8%.

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CAD remains under pressure against the USD, with the loonie holding near five-week lows after softer-than-expected Canadian inflation data reduced expectations for further Bank of Canada tightening. Falling oil prices are also weighing on the commodity-linked currency as hopes for a potential U.S.–Iran agreement ease supply concerns. Markets now expect the BoC to remain cautious despite ongoing global inflation risks. The loonie remains vulnerable to further weakness amid softening oil prices.

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EURCAD is expected to extend gains as weakening oil prices continue to pressure the Canadian dollar. The loonie also remains weighed down by fading expectations for further Bank of Canada tightening, while the euro stays supported by increasingly hawkish ECB rhetoric. Divergent policy expectations between the ECB and BoC continue to support the upside bias in EURCAD.

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EUR holds above 1.1600 despite weaker-than-expected Eurozone PMI data, as improving optimism around a potential U.S.–Iran agreement limits broader USD strength. However, the euro remains capped by soft regional growth data and expectations that the Fed could maintain a tighter policy stance following hawkish FOMC minutes. Focus now turns to the upcoming US PMI and labour market data for further direction.

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GBPEUR edges higher after weaker-than-expected Eurozone PMI data reinforced concerns over slowing regional growth momentum. Softer Eurozone business activity continues to weigh on the euro, while resilient UK manufacturing data offers modest support to sterling.

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GBP holds steady in early trading against the USD despite softer UK PMI data and fading expectations for further Bank of England tightening following weaker inflation and labour market figures. Sterling remains supported near current levels, though ongoing uncertainty surrounding U.S.–Iran negotiations and broader risk sentiment continue to underpin demand for the dollar.