The Morning Update

Risk sentiment improved as the USD weakened, oil prices rose, equities pushed higher, and bond yields edged lower. Jobless claims fell below expectations, reinforcing signs that the U.S. labour market remains resilient and layoffs subdued. No new policy signals from Fed speakers yesterday; commentary remains focused on defending Fed independence rather than rates, with markets waiting for clearer guidance ahead of the next FOMC. Trump threatened to invoke the Insurrection Act to deploy troops to Minneapolis after protests erupted over federal immigration enforcement and a recent agent-involved shooting. China and Canada agreed to cut tariffs after talks in Beijing, signalling a reset in ties. China will lower canola levies to 15%, while Canada will apply a 6.1% most-favoured-nation tariff on Chinese EVs — a move likely to draw ire from the United States, which imposes tariffs of around 100% on Chinese-made electric vehicles.

News Headlines. Activists say SpaceX’s Starlink has dropped fees to help Iranians bypass an internet blackout amid nationwide protests. Donald Trump accepted María Corina Machado’s Nobel Peace Prize medal at the White House, calling it a “great honor,” despite continuing to back Delcy Rodríguez. Venezuela’s acting President Delcy Rodríguez called for opening the state-run oil industry to more foreign investment in her first state of the union address, signaling a policy shift after the U.S. ousted former President Nicolás Maduro.

In currency markets. The CNY is trading sideways as policymakers continued to signal support for currency stability, with markets watching growth data and capital flows for near-term direction. Other Asian currencies are mixed with the USD losing ground against the JPY (0.35%) but gaining ground against INR (0.40%), KRW (0.15%) and MYR (0.10%). AUD and NZD traded steadily against the U.S. dollar, weighed by a firm greenback and cautious global risk sentiment. Trading currencies have lost some ground against the USD with the MXN down 0.04% and ZAR 0.21%.

In commodity markets. Oil prices rallied 1.2% after yesterday’s selloff. Gold prices slipped 0.22% an ounce as safe-haven demand eased and expectations for near-term Fed rate cuts faded. Silver fell 1.7% after the U.S. decided against imposing tariffs on critical minerals, easing a commodities rally that had pushed prices to record highs. Agricultural commodities are higher this morning, led by gains in soybeans (+0.25%), wheat (+0.59%), and lumber (+1.24%).

USD/CAD dipped as the Canadian dollar strengthened on higher oil prices, supported by rising geopolitical risks. Gains in the loonie were tempered by firm U.S. economic data and Fed signals that interest rates are likely to stay on hold for now.

EUR/CAD traded mostly steady, with limited movement as markets balanced a firmer Canadian dollar against subdued eurozone momentum.

EUR/USD edged higher after rebounding from six-week lows but remains on track for a third straight weekly loss, pressured by strong U.S. data reinforcing expectations that the Fed will keep rates unchanged.

GBP/EUR remained stable despite the UK GDP surprised to the upside in November, supporting the pound. The euro remains under pressure, with upcoming Eurozone data unlikely to reverse its bearish momentum without a strong upside surprise.

GBP/USD ticked higher as easing German inflation failed to lift the euro, while the pound stayed supported by strong UK growth data and a cautious BoE outlook.

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