The Morning Update

The USD holds steady, oil extends gains, equity markets are down, and US yields are mixed amid growing Mideast uncertainty. USD steady, but set for a weekly gain as stalled U.S.-Iran talks and persistent Middle East tensions continue to underpin safe-haven demand. Elevated oil prices and uncertainty around the Strait of Hormuz are keeping the dollar supported, even as broader currency moves remain muted. Focus now turns to upcoming central bank decisions and key U.S. data for further direction on the greenback. Global equities are mixed, with gains in tech stocks offsetting broader weakness across major markets. Nasdaq futures are advancing on strong semiconductor earnings, while European indices are under pressure, led by declines in cyclical sectors such as autos and retail. Overall sentiment remains cautious ahead of next week’s central bank policy decisions and ongoing Iran-related uncertainty, as elevated oil prices and geopolitical risks continue to weigh on investor confidence. Elsewhere, oil extends gains on supply disruption fears tied to Iran and risks to flows through the Strait of Hormuz. Meanwhile, gold and Bitcoin ease as rising yields and a firmer USD reduce demand for non-yielding and risk-sensitive assets. Intraday focus will be on CAD Retail Sales, US Michigan Consumer Expectations Index and the UoM 1&5 Consumer Inflation Expectation to help provide direction to currency markets.

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New Headlines. Polish PM questions whether the US is 'loyal' to Europe's defence. Trump says Israel and Lebanon will extend the ceasefire for 3 weeks. Intel shares jump 20% as it predicts revenue surge from AI data centres. Singapore turns to Russian fuel oil as war restricts Middle Eastern supplies. Microsoft to offer 7% of US staff voluntary redundancy for the first time. Canada to seek access to 'Made in Europe' scheme. Pentagon email floats suspending Spain from NATO, other steps over Iran rift. The US to loosen marijuana rules in major shift for $47 billion industry. Cybersecurity incident at Canada Life reportedly impacts thousands.

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In currency markets. Investors are shifting their focus to central bank activity next week, with policymakers widely expected to adopt a “wait-and-see” approach amid elevated uncertainty. Markets will closely monitor guidance from the Fed, ECB, BoJ and BoE, particularly on how officials assess the inflationary impact of higher energy prices and potential second-round effects. The ECB is seen holding in April with scope to tighten later, while the BoJ is likely to remain on hold but signal readiness to hike, keeping forward guidance and policy divergence in sharp focus.

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In commodity markets. Oil prices rally 1.9%. Natural Gas prices tumble 2%. Gold prices eased 0.55%. Silver prices retreated 1.2%. Copper prices weakened 1.6%. Coffee prices are flat. Soybean firm 0.25%, and Wheat prices firmed 0.6%.

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CAD holds steady in early trading, with underlying support from firmer oil prices helping to cushion downside pressure despite a stronger USD backdrop. The loonie remains sensitive to broader risk sentiment and dollar dynamics, keeping price action range-bound. Attention now turns to the Bank of Canada decision on Wednesday, where policymakers are widely expected to keep rates on hold as inflation pressures remain largely energy-driven and growth stays modest, allowing the Bank to maintain a patient stance. On the data front, retail sales are expected to show a modest month-on-month rebound of around 0.9%, pointing to resilient but still cautious consumer spending amid elevated prices and economic uncertainty.

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EURCAD trades flat as euro softness is offset by modest support for the Canadian dollar from firmer oil prices. Focus shifts to next week’s BoC and ECB meetings, where both are expected to hold rates and maintain a cautious, data-dependent stance. In the near term, attention turns to Canadian retail sales for direction on the loonie.

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EUR remains capped below 1.1700, consolidating near weekly lows as softer German IFO sentiment data reinforces a cautious tone around the euro. The pair trades in a tight range with the USD holding firm, while a lack of near-term catalysts keeps price action contained. Focus is firmly shifting to next week’s central bank decisions, with both the Fed and ECB widely expected to leave rates unchanged and maintain a data-dependent stance. ECB officials continue to signal caution, with policymakers indicating no move in April but leaving the door open to potential tightening later in the year, particularly as elevated oil prices pose upside risks to inflation.

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GBPEUR edges higher, with the cross pushing above the 1.1500 area as sterling finds modest support following stronger UK retail sales data. However, gains remain limited as the upside impact is tempered by softer core spending and broader concerns around rising energy costs. Investors are focused on BoE and ECB policy announcements next week, where both central banks are expected to hold rates but provide guidance on the outlook for inflation and the potential timing of future policy adjustments.

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GBP remains capped below 1.3500, struggling to gain traction despite stronger headline UK retail sales, as gains were largely driven by fuel purchases rather than broad-based consumer demand. The softer core component highlights underlying caution among consumers, limiting sterling’s upside and keeping the pair in a tight range. Attention now turns to the Bank of England next week, where policymakers are widely expected to hold rates, but the combination of sticky inflation and resilient activity data is reinforcing expectations that policy may need to remain tighter for longer, or even tilt toward further tightening if price pressures persist.

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