The Morning Update

The USD inched higher, oil prices lost some ground, equity markets rose slightly, and US yields slipped. USD strengthened on safe-haven demand as renewed Middle East tensions threatened to derail the US–Iran ceasefire. Oil eased but held most of its gains amid escalating Middle East tensions and renewed US–Iran clashes in the Strait of Hormuz. Precious metals traded higher as escalating Middle East tensions lifted energy prices and heightened inflation concerns. Bitcoin held near recent highs, supported by regulatory optimism and institutional demand, while geopolitical risks limited further gains. On the economic data front, PMI is set to be released later today.

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News Headlines: US–Iran peace talks remain underway, with Iran reviewing the US response to its proposal, though progress appears fragile. Tensions continue to simmer around the Strait of Hormuz after recent clashes tied to US-led efforts to escort vessels through the Gulf. Meanwhile, the UAE activated its missile defense system for the first time since the ceasefire, intercepting Iranian missile and drone attacks in a notable escalation of regional risks.

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In currency markets. Global FX is in a risk-off regime, with USD and CHF outperforming, yen highly volatile on intervention, and emerging market currencies the biggest losers. The RBA kept its policy rate unchanged, maintaining a cautious stance as it monitors inflation progress and a still-resilient labor market, while signaling that further tightening cannot be ruled out if price pressures persist. Mozambique is considering converting its debt to China into yuan loans amid a worsening liquidity crisis, highlighting Beijing’s push to expand the renminbi’s global role. Japan can conduct only two more three-day intervention sessions under IMF rules—where three days count as one operation to preserve its free-floating currency status.

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In commodity markets. Oil prices are off 2.4%. Natural Gas prices rose 1.00%. Gold gained 0.60%.  Silver prices rose 1.20%. Copper rallied 2.16%. Coffee prices gained 2.37%. Soybean is off 0.33%, and Wheat prices declined 0.47%.

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USD/CAD edged lower as the Canadian dollar found support despite safe-haven demand for the US dollar, with softer risk sentiment and diverging US–Canada economic outlooks shaping the move.

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EURCAD traded in a tight range with a neutral bias, as stable Eurozone conditions were offset by mixed Canadian dollar drivers tied to oil prices and domestic economic outlooks.

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EUR held steady as markets balanced Middle East tensions, elevated oil prices, and rising expectations of an ECB rate hike, while fresh US tariffs and troop withdrawal plans added pressure on EU–US relations.

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GBPEUR is held near recent multi-week highs, with the pound supported by relatively stronger Bank of England signals while the euro remains steady, though trading is cautious and somewhat subdued due to thin liquidity and ongoing geopolitical uncertainty.

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GBP eased from recent highs as investors focused on upcoming UK municipal elections and potential political risks, while elevated oil prices and ongoing US–Iran tensions in the Strait of Hormuz added to broader market uncertainty.

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