The Morning Update

The USD edges higher, oil prices extend gains, equity markets and US yields are mixed, as investors focus on weekend US/Iran talks. The U.S. dollar edges higher in early trading but is set for its largest weekly decline since January as easing geopolitical tensions reduce demand for safe-haven assets. Optimism about a U.S.–Iran ceasefire has prompted a reversal of recent defensive positioning, with markets unwinding dollar-long positions. However, the truce remains fragile, and attention now turns to upcoming U.S.–Iran talks, which are expected to be a key driver of near-term direction. Global equities pause after a strong rally, with investors turning cautious ahead of the weekend's U.S.–Iran talks. Markets appear to be consolidating gains as optimism around a ceasefire is balanced by uncertainty over its durability. In the near term, direction will be driven by geopolitical developments and whether progress toward a more lasting agreement can be made. Elsewhere, oil prices have rallied amid ongoing U.S.–Iran uncertainty and concerns over supply disruptions, while gold prices have weakened as safe-haven demand moderates. Bitcoin has also slipped, reflecting a more cautious tone across broader markets. Investors will focus on today's CAD jobs data, the US inflation report, and the Michigan Consumer Sentiment index to provide intraday direction for currency markets.

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News Headlines. North Sea oil prices hit a record high as Iran keeps hold over the Hormuz Strait. NATO split over US access to European bases in Iran war. Iran ceasefire undercuts Netanyahu's election pitch. Ukraine interceptors downed Iran's drones in the Middle East, says Zelensky. EU boosts imports of Russian gas as Middle East crisis squeezes supplies. Canada pushes to join the UK-Italy-Japan advanced fighter jet project. China's Xi tells Taiwan opposition leader unification is an 'inevitability'. China's factory gate prices rise on the back of the war in Iran. NDP launches campaign to keep Alberta in Canada as court hearings proceed.

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In currency markets. Against the U.S. dollar, currency markets remain largely sidelined, with price action subdued as investors adopt a cautious stance ahead of the weekend U.S.–Iran talks. Uncertainty surrounding the ceasefire's durability is limiting conviction, keeping major pairs within recent ranges. In the near term, direction will be driven by geopolitical developments, with markets sensitive to any shift in sentiment. CNY is flat, while Asian currencies slip 0.15% on average against the USD. Trading currencies are mixed, with ZAR eased 0.35%, AUD, NZD, JPY & PLN down 0.1%, MXN, SEK, NOK, DKK, & CZK flat, and CHF & KWD up 0.1% against the USD.

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In commodity markets. Oil prices rallied 1.25%. Natural Gas prices strengthened 0.95%. Gold prices weakened 1%. Silver prices tumbled 1.5%. Copper prices advanced 0.7%. Coffee & Wheat prices eased 0.2%, and Soybean prices firmed 0.3%.

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CAD slips off recent two-week highs in early trading as caution builds ahead of the weekend amid uncertainty surrounding the U.S.–Iran truce. Firmer oil prices have provided some support, though gains remain tentative as markets question the ceasefire's durability. Focus now turns to Canada’s upcoming employment data, today’s U.S. inflation report, and evolving expectations for the Bank of Canada, with broader direction still driven by geopolitical developments.

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EURCAD continues to advance, strengthening over 3% over the past month, supported by expectations of policy divergence between the ECB and Bank of Canada. Despite firmer oil prices, which would typically support the Canadian dollar, the euro remains underpinned by relative monetary policy dynamics. Focus now turns to today’s Canadian employment report for further direction.

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EUR struggles to build on recent gains, holding below the 1.1700 level as markets turn cautious ahead of today’s U.S. CPI report. Expectations of firmer inflation, driven in part by higher energy prices, are supporting the U.S. dollar and limiting upside in the pair. Focus now centres on the inflation data, which is expected to provide key direction for Fed policy expectations and near-term market moves.

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GBPEUR softens in early trading, slipping below the 1.1500 level as the euro remains supported. Ongoing uncertainty surrounding the U.S.–Iran ceasefire is weighing on risk sentiment, while firmer Eurozone inflation continues to support expectations of ECB tightening. In contrast, a more cautious Bank of England stance is limiting sterling upside, leaving near-term direction driven by central bank expectations and geopolitical developments.

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GBP recovers toward the 1.3450 level in early trading, supported by a softer U.S. dollar as market sentiment stabilizes. Investors remain cautious ahead of the weekend, with limited confidence in the durability of U.S.–Iran truce talks, while a cautious Bank of England stance continues to cap sterling upside. Focus now turns to today’s U.S. inflation report, which is expected to be the key driver of near-term direction.