The Morning Update

The USD firms, oil prices hold steady, equity markets are up, and US yields rise with Venezuela in focus. The US dollar has strengthened to multi-week highs amid heightened geopolitical risks following the US move against Venezuela, prompting near-term defensive demand for USD. Market reaction has been relatively contained, with investors viewing the situation as manageable rather than the start of a prolonged conflict. Focus is now shifting back to US economic data this week, which will be critical in shaping expectations for the Fed’s policy path in 2026. Attention is also on President Trump’s forthcoming nomination for Fed chair with Jerome Powell stepping down in May, with the prospect of a more dovish successor potentially limiting sustained dollar upside. Global equities remain resilient despite heightened geopolitical risk following the events in Venezuela, with markets viewing the situation as unlikely to disrupt growth or the current bull cycle. US and global stocks continue to be driven by structural themes, with AI-related technology shares leading gains and overshadowing geopolitical concerns. The strong performance of US tech reflects ongoing optimism around earnings, productivity gains and capital investment linked to AI adoption. Overall, Venezuela has added some volatility at the margin, but equity markets remain firmly focused on growth drivers rather than geopolitical risk. Elsewhere, oil prices remain relatively steady, with markets judging the situation in Venezuela unlikely to disrupt near-term global supply materially. In contrast, gold and silver have rallied sharply, benefiting from increased safe-haven demand amid geopolitical uncertainty and shifting rate expectations. Bitcoin has also strengthened, supported by broader risk diversification flows, though precious metals continue to attract the bulk of defensive positioning. Economic focus this week: Monday, US ISM Manufacturing PMI. Tuesday, ECB's Cipollone speech, German CPI, & S&P Global PMI. Wednesday, EU inflation report, US ADP Employment Change, US ISM Services PMI.Thursday, Swiss CPI, US Initial Jobless Claims, China CPI. Friday, EU Retail Sales, CAD Unemployment Report, US NFP Report, & Michigan Consumer Expectations Index will help drive direction to currency markets this week.

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In the news. Trump warns Venezuelan rulers as Washington prepares to dictate policy. Denmark tells Trump to stop threatening to seize Greenland. Deutsche Bank shares exceed book value for the first time since 2008. The US legal case against Maduro to test the limits of presidential power. Thailand-Cambodia ceasefire 'gradually' being implemented, says China. Ukraine's Zelensky appoints Canadian ex-deputy PM as economic adviser. Chevron, US refiners' shares surge after Trump's move toward Venezuela oil. Safe-haven gold & silver propelled to a one-week high by the US-Venezuela conflict. Canadian officials say US health institutions are no longer dependable for accurate information.

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In currency markets. The Japanese yen has strengthened as investors favour safe-haven currencies amid geopolitical uncertainty and renewed focus on central bank policy. In contrast, the Mexican peso has weakened on heightened regional risk sentiment and broader USD strength. At the same time, the Norwegian krone has come under pressure as softer oil prices and rate differentials weigh. Overall, FX markets are rewarding defensive positioning while higher-beta and commodity-linked currencies lag. CNY slips 0.1%, while Asian currencies are down 0.2% against the USD. Trading currencies comes under pressure, with PLN, MXN & CZK weakening 0.55%, DKK, NOK, & CHF falling 0.35%, KWD, AUD, NZD & SEK down 0.1%, while JPY & ZAR gained 0.15% against the USD.

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In commodity markets. Oil & Wheat prices up 0.15. Natural Gas prices tumbled 3.25%. Silver prices rallied 6%. Copper & Gold Prices strengthened 2.8%. Soybean prices gained 0.65%, while Coffee prices fell 0.6%.

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CAD has extended its decline and is testing two-week lows against the US dollar, as persistent weakness in domestic manufacturing and softer oil prices continue to weigh on sentiment. With oil representing Canada’s largest export, the pullback in crude — driven by oversupply concerns and expectations that Venezuelan production could rise over the medium term — has reduced a key source of external support for CAD. At the same time, renewed safe-haven demand and stronger positioning in the US dollar at the start of 2026 have added to downside pressure. Looking ahead, attention is firmly on Friday’s US jobs report, which is expected to be a key driver of near-term USD strength and further CAD volatility.

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EURCAD has edged higher as persistent weakness in the Canadian dollar — driven by soft domestic data and declining oil prices — outweighs ongoing pressure on the euro. While EUR/USD remains subdued, broader USD strength and CAD sensitivity to growth and energy dynamics are allowing the cross to grind higher near recent highs.

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EUR remains under pressure near four-week lows below 1.1700 as renewed geopolitical concerns following the US intervention in Venezuela have supported safe-haven demand for the US dollar. While markets view the situation as contained, the firmer USD tone has extended last week’s gains amid cautious positioning. Attention now turns to US manufacturing data, with today’s ISM PMI expected to offer near-term direction for the pair. However, the main focus for FX markets remains Friday’s US jobs report, which is likely to be decisive for the Fed easing outlook and EUR/USD momentum.

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GBPEUR firms to a two-month high as renewed geopolitical tensions in Eastern Europe weigh on euro sentiment. Concerns around energy security and heightened uncertainty continue to undermine the single currency. In contrast, sterling remains supported by expectations that the Bank of England will pursue a cautious and gradual easing path, underpinned by still-elevated UK inflation.

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GBP has strengthened against the US dollar, supported by expectations that the Bank of England will follow a gradual and cautious easing path in 2026. This policy outlook has helped sterling outperform despite broader geopolitical uncertainty and episodic safe-haven demand for the USD following events in Venezuela. Near term, GBP/USD remains sensitive to US data, with ISM manufacturing and Friday’s jobs report key to sustaining the move.

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