The Morning Update

The USD advances, oil prices and equity markets weaken, and US yields are flat as we start the week. Last week’s PPI came in firmer than expected, reinforcing sticky inflation pressures, and markets now turn to this week’s key US releases — including CPI, retail sales, and Fed-sensitive activity data—for clearer direction on rates and growth. The new Fed chair nominee is Kevin Warsh, and markets have reacted cautiously, with investors watching for any shift toward a more hawkish policy stance. Democrats notched a double-digit upset in a Texas state senate special election, flipping the seat for the first time in decades. While it doesn’t affect the U.S. House directly, it’s viewed as an early signal of shifting momentum ahead of the 2026 midterms. Dmitry Medvedev warned on Monday that the world is becoming increasingly dangerous, though Russia does not want a global conflict. His remarks come as Trump’s envoys push for talks to end the war in Ukraine. President Trump said the U.S. would likely “work a deal” with Cuba, urging negotiations after warning of tariffs on countries supplying the island with oil. Canada will mark the imminent arrival of its first F-35 at a ceremony in Texas on Monday, even as Ottawa reviews the broader fighter jet purchase amid rising trade and political tensions with the U.S.

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News Headlines. Israel reopened the Gaza–Egypt crossing on Monday for a limited number of pedestrians, allowing some Palestinians leave or re-enter for the first time since the war began. More than 30 Venezuelan “political prisoners” were released on Sunday, Foro Penal said, following Delcy Rodríguez’s proposed amnesty law for hundreds of detainees.

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In currency markets. A poll suggests PM Takaichi’s party is headed for a landslide election win, reinforcing her push for spending and tax cuts and stoking concerns over Japan’s finances and higher bond yields. The poll, however had no effect on the JPY. Other Asian currencies were mixed with the CNY strengthening 0.27% against the USD while MYR lost 0.38%. Both AUD and NZD are flattish on the day.  The trading currencies gained on the greenback with the ZAR up 0.87% and the MXN up 0.56%.

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In commodity markets. Oil prices fell about 5% on Monday after President Trump said Iran was “seriously talking” with Washington, easing fears of supply disruptions. Gold and silver sank Monday as Warsh’s Fed nomination sparked a risk-off move. Gold fell 5% to a two-week low, while silver dropped over 7% after last week’s record highs. Agricultural markets were also dragged lower, with soybeans down 0.5%, wheat off 0.8%, and lumber slipping 1.0%.

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USD/CAD extended gains to around on Monday as a weaker oil backdrop pressured the commodity-linked Canadian dollar, with WTI sliding over 5% amid easing Iran risk premiums. The pair also drew support from a firmer US dollar, as markets interpreted Kevin Warsh’s Fed chair nomination as a more hawkish signal on the policy outlook.

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EUR/CAD stayed firm, underpinned by a softer Canadian dollar as oil prices fell sharply and risk sentiment deteriorated.

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EUR/USD held modest gains despite stronger Eurozone PMI, as Warsh’s Fed nomination supported the dollar and investors stayed cautious ahead of the ECB and US jobs data.

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GBP/EUR rose slightly but remains in a broader bullish consolidation near key support, with downside still limited.

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GBP/USD firmed up as the dollar eased slightly, though Warsh’s Fed nomination continues to underpin the greenback on expectations of a more cautious path for rate cuts.

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