The Morning Update

The USD eases, oil prices firmed, while equity markets and US yields are mixed as focus shifts to China's comments, and this week's key US data. The U.S. dollar faces renewed pressure after reports that China urged banks to curb Treasury exposure, reviving credibility concerns just as the currency was recovering from tariff-related turmoil. The signal from one of the world’s largest reserve holders has increased willingness to price down the greenback, with the dollar easing in early trading as investors trimmed positions. Focus now turns to key U.S. jobs and inflation data, which will shape expectations for the timing and scale of Federal Reserve rate cuts and near-term FX direction. Global equities were mixed, with Asian markets mostly higher after Japan’s election result boosted confidence, while U.S. futures, the UK and parts of Europe traded lower amid renewed pressure on technology stocks. Concerns over U.S. assets resurfaced after China flagged risks around Treasury holdings, weighing on U.S. futures even as investors pared back the initial bond-market reaction. Overall sentiment remains cautious, with equity gains in Asia offset by weakness in Western markets ahead of key U.S. data and ongoing uncertainty around AI investment and Fed policy. Focus today will be on a flurry of Fed, BoE, and ECB speakers to help drive currency market direction.

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In the news. Japanese stocks soar to record after Takaichi's landslide election win. Kier Starmer faces crunch week in a battle to hold on to power. The US embassy in London denies visas to executives over minor offences. Italian olive oil farmers say a flood of imports is causing price collapse. Thai conservatives cruise to surprise election win. China overturns Canadian's death sentence after Carney visit, lawyer says. Taiwan says 40% shift to chip capacity to the US is 'impossible'. China urges banks to curb exposure to US Treasuries. Climate risk threatens the credit rating of dozens of counties. Warsh call for Fed-Treasury accord stirs debate in $30 trillion bond market.

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In currency markets. Against the dollar, the yen led gains after Japan’s ruling coalition secured its largest post-war election victory, reinforcing expectations of continued fiscal support and a gradual policy normalization path. The Danish krone firmed as the central bank stayed closely aligned with ECB policy, anchoring rates while benefiting from broader euro-area stability. The Swiss franc also advanced on renewed safe-haven demand as investors grew more cautious on U.S. assets and global risk sentiment softened. CNY gained 0.25%, while Asian currencies on average firmed 0.15% against the USD. Trading currencies are mixed, with ZAR, KWD & NOK falling 0.2%, NZD & MXN flat, SEK up 0.1%, CZK, & AUD firmed 0.2%, PLN, JPY & DKK gained 0.35%, and CHF strengthened 0.5% against the USD.

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In commodity markets. Oil prices firmed 0.4%. Natural Gas Prices Tumbled 7%. Gold prices strengthened 0.8%. Silver prices rallied 3%. Copper prices down 0.3%. Coffee prices weakened 0.9%. Soybean & Wheat prices eased 0.4%.

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CAD edged higher in early trading, recouping most of its weekly decline as the unemployment rate unexpectedly fell, offsetting headline job losses that were concentrated in part-time roles. Support also came from firmer oil prices, higher bond yields and guidance from the Bank of Canada pushing back against the need for further rate cuts. With little in the way of key domestic data ahead, near-term CAD direction is likely to be driven by U.S. data, broader dollar moves and risk sentiment.

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EURCAD moved higher as the euro stayed well supported by improving Eurozone sentiment and focus on ECB messaging. The Canadian dollar lagged amid a quiet domestic data calendar, leaving the cross driven by relative policy and sentiment dynamics.

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EUR strengthened above 1.1850, with EUR/USD holding firm as broad U.S. dollar weakness persisted following China’s comments on curbing Treasury exposure. The single currency found additional support from improving Eurozone sentiment and ahead of a busy slate of ECB speakers, including President Christine Lagarde, which kept the euro well bid. With markets cautious on rebuilding dollar longs ahead of key U.S. data, attention is firmly on ECB guidance for near-term direction.

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GBPEUR edged lower as the euro benefited from stronger Eurozone sentiment and steady ECB guidance. Sterling remained pressured by UK political uncertainty and expectations of earlier Bank of England rate cuts.

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GBP edged higher despite a fresh UK government crisis, supported by a softer U.S. dollar but with gains capped near 1.3650. Political uncertainty in London continued to weigh on sentiment, limiting upside momentum. With focus on delayed U.S. jobs and inflation data, near-term direction is likely to be driven by U.S. data and central bank signals rather than UK fundamentals.