The Morning Update

The USD is flat, oil prices are strengthening, equity markets are up, and US yields are rising ahead of key data releases. The US dollar is trading broadly flat but remains on track for its first monthly gain since October, supported by geopolitical tensions and expectations that the Federal Reserve may keep rates higher for longer. Markets are now focused on the key US Producer Price Index (PPI) data, which could influence rate-cut expectations and determine whether the greenback can extend its recent resilience. Global equities are broadly higher, with European stocks on track for another monthly advance and Asia-Pacific shares posting strong February gains, as investors rotate away from US mega-cap tech into cyclical and international markets. In contrast, US futures are struggling in pre-market trading, leaving the S&P 500 facing a potential monthly loss after volatility driven by AI disruption concerns and chip-sector weakness. The divergence underscores ongoing asset reallocation amid policy uncertainty, geopolitical tensions and questions over the sustainability of US tech-led leadership. Elsewhere, gold prices are holding broadly flat while oil extends its gains, supported by ongoing geopolitical tensions and steady energy demand. Meanwhile, Bitcoin has come back under pressure, retreating toward the $66,000 level as risk appetite softens. In focus today: the US PPI report, CAD GDP Q4, German CPI, and speeches from BoE Pill & ECB's Kocher will help drive the direction of the currency markets.

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In the news. India's economy grows at a faster-than-expected pace of 7.8% in the December quarter. Paramount clinches Warner Bros deal after Netflix walks away. Starmer rocked by historic Green by-election victory. Jack Dorsey's block to cut workforce by 'nearly half' as it leans on AI tools. US and Iran make 'progress' in nuclear talks, mediator says. US regulator scrutinized over bank license sought by Trump crypto venture. Pakistan bombs targets in Afghan cities, minister calls it 'open war'. Canada's Fairfax on course to take record foreign stake in an Indian bank. Ford is recalling more than half a million vehicles in Canada due to software issues.

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In currency markets. Against the US dollar, the yuan eased after a 10-day rally as the PBOC acted to slow the pace of appreciation, guiding the currency weaker through a softer midpoint fix and adjustments to FX risk reserve requirements. Meanwhile, the Australian dollar extended gains as the year’s best-performing G10 currency, while the yen remained under pressure despite expectations of further BOJ tightening, allowing the dollar to stay supported against Japan’s currency. CNY eased 0.25%, while Asian currencies are down 0.15% on average against the USD. Currencies are sidelined, with JPY, KWD, DKK, CZK & PLN down 0.1%, NZD, ZAR & SEK flat, AUD, MXN & CHF up 0.1%, and NOK rallies 0.4% against the USD.

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In commodity markets. Oil & Copper prices strengthened 2%. Natural Gas prices advanced 0.8%. Silver prices rallied 2.9%. Coffee prices eased 0.6%. Gold prices are flat. Soybean prices up 0.1%, and Wheat prices gained 1%.

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CAD holds steady as firmer oil prices lend support to the commodity-linked currency, while ongoing US trade-policy uncertainty keeps the greenback broadly contained. Attention now shifts to Canada’s Q4 GDP release, expected to show flat growth, which will be key in shaping expectations for the Bank of Canada’s policy path. A stronger-than-expected print could reinforce the BoC’s current on-hold stance and provide near-term upside for the loonie, while a downside surprise may reignite rate-cut speculation and leave CAD vulnerable, particularly with US PPI data also due later in the session.

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EURCAD trades sideways ahead of the key Canadian GDP report, with investors avoiding fresh positions pending clearer signals on economic momentum. The upcoming data could drive volatility in the Canadian Dollar as markets reassess the outlook for the Bank of Canada.

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EUR remains steady ahead of the key German inflation and US PPI releases, trading close to 1.1800 as markets await a clearer direction. The euro lacks fresh momentum, while the US Dollar continues to draw support from the Federal Reserve’s cautious, data-driven approach. The upcoming inflation data may prove decisive in shaping rate expectations and guiding the pair’s next move.

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GBPEUR remains under pressure as rising UK political uncertainty and policy risks weigh on Sterling, ING says. The Green Party’s by-election victory has intensified concerns about fiscal stability and the Bank of England's dovish stance,

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GBP struggles below 1.3500 as UK political uncertainty and rising expectations of the Bank of England easing weigh on Sterling. The loss of the Gorton and Denton by-election, a former Labour stronghold, has raised questions about Prime Minister Keir Starmer’s authority and added to domestic political risks. Softer labour market data and cooling wage growth have further strengthened bets on a potential March rate cut. Focus now shifts to comments from BoE Chief Economist Huw Pill for fresh guidance on the policy outlook.