The Morning Update

The USD is higher, oil prices are weakening, equity markets are up, and US yields are mixed amid uncertainty over peace talks. The U.S. dollar trades near one-year highs as investors continue to favour the greenback amid expectations for further Federal Reserve tightening. Markets are increasingly pricing in at least one Fed rate hike this year, supporting U.S. Treasury yields and broad-based dollar demand. Ongoing uncertainty surrounding U.S.-Iran peace negotiations is also boosting safe-haven flows into the dollar. Global equity markets are mostly higher as investors cautiously return to risk assets following the recent technology-led selloff. Gains are being led by a rebound in South Korea's Kospi and modest advances in U.S. stock futures, with attention turning to Micron's earnings report as a key test of the strength of the artificial intelligence investment theme. Despite the improvement in sentiment, investors remain mindful of valuation concerns and the potential impact of higher U.S. interest rates on growth-oriented sectors. Elsewhere, oil prices continue to ease, down roughly 18% in June and trading near four-month lows as progress in U.S.-Iran negotiations and improving traffic through the Strait of Hormuz reduce supply concerns. Gold prices remain near two-week lows while Bitcoin edges higher, as investors balance improving risk sentiment against expectations for higher U.S. interest rates. Today sees a light economic calendar, with markets focusing on BoE and ECB speakers, and the US New Home Sales report to help guide currency markets.

‍

News Headlines. Venezuela to reveal a $240 billion debt pile in the world's largest restructuring. Germany scraps plans to build its largest warship since the Second World War. Burnham set to demote Reeves to a lesser cabinet role. The US and Iran at odds on nuclear inspections, frozen assets in a deal to end war. The US Senate joins the House in voting to halt the Iran war, rebuking Trump. Oman opens temporary Strait of Hormuz shipping routes, says no tolls will be charged. Canadian dollar hits 14-month low as tech selloff spurs safe-haven demand. Canada to send warships to the Indo-Pacific area, Defence Minister says.

‍

In currency markets. Against the USD, major currencies remain under pressure as investors continue to favour the greenback amid expectations for further Federal Reserve tightening and resilient U.S. economic data. Ongoing uncertainty surrounding U.S.-Iran peace negotiations is supporting safe-haven demand for the dollar, while widening interest rate differentials continue to weigh on global currencies. The Japanese yen remains near a 40-year low against the U.S. dollar, keeping intervention risks firmly in focus.

‍

In commodity markets. Oil -1.60% | Nat Gas -1.10% | Gold -1.61% | Silver -1.60% | Copper -0.70% | Palladium -1.95% | Coffee -0.60% | Cocoa -0.90% | Soybeans +0.10%

‍

CAD remains under pressure after falling to fresh 2026 lows against the U.S. dollar, weighed down by weaker oil prices, slowing domestic growth, and widening interest rate differentials in favour of the United States. Recent comments from Bank of Canada Governor Tiff Macklem offered little support for the loonie, with inflation pressures appearing concentrated in energy while underlying price measures remain relatively subdued. Ongoing USMCA uncertainty, safe-haven demand for the U.S. dollar, and expectations for further Federal Reserve tightening continue to favour USD/CAD strength.

‍

EURCAD eases slightly in early trading as investors assess recent comments from Bank of Canada Governor Tiff Macklem alongside the latest Eurozone economic data. Despite the modest day-to-day moves, EUR/CAD remains firm near multi-month highs, with the medium-term outlook favouring further gains through Q3 amid softer Canadian economic conditions, weaker oil prices, ongoing USMCA uncertainty, and a relatively more hawkish ECB policy backdrop.

‍

EUR remains under pressure near 1.1350, its lowest level of the year, as investors continue to favour the U.S. dollar amid expectations for further Federal Reserve tightening and resilient U.S. economic data. The single currency is also weighed down by widening U.S.-Eurozone yield differentials, while ongoing uncertainty surrounding U.S.-Iran negotiations continues to support safe-haven demand for the greenback. Investors will monitor comments from ECB policymakers and upcoming U.S. economic data for further direction.

‍

GBPEUR holds steady in early trading near 10-month highs as sterling continues to benefit from expectations that Andy Burnham will become the next UK prime minister, reducing near-term political uncertainty. Investors remain focused on Burnham's expected cabinet appointments, particularly the choice of finance minister, while resilient UK economic data and a stronger growth outlook relative to the Eurozone continue to support the pound.

‍

GBP remains under pressure, testing the 1.3150 area as a stronger U.S. dollar, weak UK PMI data, and ongoing political uncertainty continue to weigh on sterling. Expectations for further Federal Reserve tightening, alongside safe-haven demand linked to uncertainty surrounding U.S.-Iran negotiations, have lifted the greenback to fresh one-year highs and widened the policy divergence between the Fed and the Bank of England.