The Morning Update

USD softens amid cautious sentiment, oil and equities retreat on growth concerns, while Treasury yields ease as investors seek safety. No US economic data of significance out today. U.S. stocks fell as mid-sized banks, including Zions and Western Alliance, dropped sharply over loan defaults and alleged fraud, raising broader concerns about credit quality. This weekend’s IMF meeting is expected to stress resilient growth outlook but warn on inflation, debt risks, and vulnerabilities in shadow banking such as private credit and non-bank lenders. The U.S. government remains in a partial shutdown, furloughing 900,000 workers and straining the economy, with no resolution in sight amid disputes over spending, foreign aid, and ACA tax credits. Former Trump adviser John Bolton has been indicted on federal charges over alleged mishandling of classified information, making him the third of Trump’s political opponents charged in recent weeks. U.S.–China tensions rise as China enforces rare earth export controls and the U.S. threatens new tariffs, while investment and technology restrictions tighten. Diplomatic engagement continues with an upcoming Trump-Xi meeting, amid global growth risks and China keeping lending rates steady. Chinese exporters shift focus to Europe, Latin America, the Middle East, and Africa as U.S. tariffs disrupt sales, with some abandoning the American market entirely. Bitcoin fell about 6% to around $104,476 after a $19 billion market liquidation, following its recent $126,251 high. Despite the drop, trading volumes remain strong, though analysts warn of continued volatility and potential weekend shocks.

In the news. Zelensky meets Trump in Washington as the U.S. weighs sending Tomahawk missiles to Ukraine, following Trump’s “productive” call with Putin and plans for U.S.–Russia talks in Hungary. Belarus seeks to reduce political isolation through EU talks following a thaw with Washington, though some European diplomats remain skeptical. The Israel-Hamas ceasefire holds, but both sides accuse each other of violations and delays in returning Israeli hostages’ remains. Humanitarian conditions in Gaza remain dire, with the Rafah crossing closed and urgent aid needed.

In currency markets. AUD and NZD face pressure from weak domestic data, RBA/NZ policy expectations, and ongoing U.S.-China trade tensions. Asian currencies showed mixed but generally stable performance amid global economic uncertainties. Asian currencies, including CNY, JPY, MYR, and THB, are broadly weaker amid global economic uncertainty and domestic challenges. The Mexican Peso (MXN) and South African Rand (ZAR) are weakening amid global economic uncertainty and softer commodity demand, while the Polish Zloty (PLN) and Czech Koruna (CZK) are slightly stronger, supported by relative eurozone stability. Movements reflect regional economic indicators, emerging market risks, and broader investor sentiment, with MXN and ZAR particularly sensitive to risk-off flows and PLN/CZK benefiting from safe-haven and eurozone-linked demand.

In commodity markets. Gold and silver surged to record highs, with gold surpassing $4,300 and silver reaching $54.47, as investors flocked to safe havens amid geopolitical tensions, economic uncertainty, and expectations of U.S. rate cuts. In broader commodities, trends are mixed: crude oil and natural gas are under pressure from oversupply and weak demand, copper faces declines amid a slowing global economy, while agricultural commodities show varied performance—soybeans and wheat gain modestly on harvest conditions and steady demand, and coffee remains volatile due to weather and shifting consumption patterns. Overall, energy markets are bearish, while agricultural markets reflect seasonal and trade-driven influences.

USD/CAD continues to show upward momentum, underpinned by safe-haven demand for the dollar amid U.S. economic uncertainty and ongoing volatility in oil prices, while traders remain cautious about potential short-term pullbacks.

EURCAD is trading under pressure as the euro weakens against the dollar, with downward momentum reinforced by economic uncertainty in the Eurozone.

EURUSD remains pressured by a stronger U.S. dollar and rising expectations of U.S. rate cuts, while eurozone economic uncertainty weighs on the pair. Investor sentiment is influenced by geopolitical tensions and global risk-off dynamics, keeping the euro under pressure.

GBPEUR faces downward pressure as the pound weakens amid lingering UK economic concerns, while the euro remains under strain from broader eurozone uncertainty. Market sentiment is shaped by geopolitical risks and cautious investor positioning, limiting sterling’s upside against the euro.

GBP has risen to a one-week high, supported by a weaker U.S. dollar amid dovish Fed signals and concerns over the U.S. government shutdown. The pair’s momentum is also influenced by UK economic data showing moderate growth, while traders watch for upcoming U.S. reports that could affect the dollar.

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