The Morning Update

The USD is steady, oil prices ease, equity markets are mixed, and US yields ease as markets monitor Mideast signals. The U.S. dollar remained range-bound as investors continued to monitor developments in U.S.-Iran negotiations while awaiting a series of key U.S. economic releases, including today's JOLTS job openings report and Friday's non-farm payrolls data. With the Federal Reserve's policy outlook still highly data-dependent, traders remain cautious, as stronger labour market figures could reinforce expectations that U.S. interest rates will remain higher for longer. Global equity markets were mixed as investors balanced continued enthusiasm around AI-driven growth against ongoing uncertainty surrounding Middle East peace negotiations. U.S. futures edged lower after a strong recent rally, while gains in technology stocks supported Asian and European markets, with investors remaining sensitive to developments in oil prices, inflation expectations, and the outlook for interest rates. Elsewhere, oil prices eased as investors remained hopeful that diplomatic efforts in the Middle East could reduce the risk of supply disruptions. Gold prices firmed on lingering geopolitical uncertainty, while bitcoin edged lower as traders took profits following recent gains. Focus today will be on key central bank speakers, including BoE Governor Bailey, and JOLTS Job Openings will help drive currency market direction.

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News Headlines. The US is in talks to expand nuclear weapons deployment in Europe. Eurozone inflation rises to 3.2% in May as the ECB prepares to raise rates. Gold replaces US Treasuries as world's top reserve asset, ECB says. Israel's Netanyahu faces backlash after Trump call. Alphabet to sell $80 bn in stock in fund AI spending spree. China's hunt for US tungsten escalates the global critical-minerals race. South Korea's Hanwha to use Algoma Steel material to build military vehicles in Canada. Draft Federal AI strategy aims to scale up adoption, offer literacy training by 2031. Major Russian drone and missile attacks hit Kyiv and other cities.

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In currency markets. Against the USD, the Japanese yen remained under pressure near the key 160 level, keeping markets alert to the risk of intervention from Japanese authorities. Investors are also awaiting comments from Bank of Japan Governor Kazuo Ueda, with traders looking for further clues on the likelihood of a rate hike at next week's policy meeting.

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In commodity markets. Oil & Wheat prices weaken 0.8%. Natural Gas prices are up 0.35%. Gold & Copper prices strengthened 1%. Silver prices rallied 1.7%. Coffee prices eased 0.4%, and Soybean prices are down 0.25%.

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CAD remained under pressure in early trading, with the loonie testing the 1.3850 area as investors weighed weaker domestic growth prospects against expectations for higher-for-longer U.S. interest rates. Market attention now turns to Friday's Canadian employment report and the Ivey PMI survey, which could provide further insight into the health of the economy following last week's disappointing GDP data and the confirmation of a technical recession.

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EURCAD extended its gains in early trading, breaking above 1.6100 as firmer Eurozone inflation data reinforced expectations for further ECB rate hikes. Meanwhile, the Canadian dollar remained under pressure following Friday's recession-confirming GDP report, prompting markets to scale back Bank of Canada rate-tightening expectations. The pair now appears to be targeting a move toward 1.6150, with today's Canadian Ivey PMI data likely to provide the next catalyst.

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EUR held modest gains in early trading after Eurozone inflation accelerated to 3.2% in May, reinforcing expectations that the ECB will continue tightening monetary policy in the months ahead. Investors now turn their attention to today's U.S. JOLTS job openings report and ongoing developments in the Middle East, with stronger U.S. labour market data likely to support the dollar and limit further upside for the euro.

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GBPEUR held firm in early trading as stronger-than-expected Eurozone inflation data failed to provide meaningful support for the single currency, with markets already fully pricing in an ECB rate hike next week. Sterling remained underpinned by easing political uncertainty in the UK, while investors looked ahead to further ECB commentary and economic data for additional policy clues.

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GBP held steady in early trading as investors weighed ongoing uncertainty surrounding U.S.-Iran peace negotiations against signs of easing regional tensions following a limited ceasefire between Israel and Hezbollah. Attention now turns to comments from Bank of England Governor Andrew Bailey later today, with markets looking for further guidance on the interest rate outlook after recent remarks suggested policymakers are in no rush to tighten policy further.