The Morning Update

The USD holds steady, oil prices rebound, equity markets are down, and US yields are mixed on growing geopolitical tensions. The US dollar is poised for a third straight daily gain as investors position ahead of Friday’s closely watched non-farm payrolls report, which is seen as crucial for the Federal Reserve’s 2026 rate path. Mixed US economic signals, including a stagnant labour market alongside resilient services activity, have helped the greenback hold ground, with much of the bearish positioning already unwound ahead of key data. Geopolitical tensions—from the US intervention in Venezuela to broader strategic concerns in regions like Greenland—continue to influence sentiment and support defensive demand for the dollar. Near term, macroeconomic data and clarity around future Fed leadership are likely to be the dominant drivers of USD direction. Global equities are down as investors pull back after a strong start to 2026, with US stocks slipping amid uncertainty around President Trump’s expanding policy agenda. Markets are taking a cautious pause ahead of Friday’s US non-farm payrolls report, which is expected to be key in shaping expectations for the Fed’s policy path. Elsewhere, oil prices have rebounded as energy markets stabilize, while gold has eased from recent highs amid shifting macro expectations. Bitcoin has weakened toward the $90,000 level, underperforming amid softening risk appetite across digital assets. In focus today, US Initial Jobless Claims, Nonfarm Productivity, and Unit Labor costs will help provide intraday direction, ahead of Friday's key US NFP report.

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In the news. US oil groups warn they will need guarantees to invest in Venezuela. China hacked the email systems of the US congressional committee staff. The US will discuss the future of Greenland with Danish officials next week. Trump calls for a 50% increase in US defence spending by 2027. US seizes Russian-flagged tanker, another tied to Venezuela as Trump widens oil push. Gold falls as commodity index rebalancing sparks selling pressure. European and UK defence stocks hit record highs. Mark Carney to visit China next week, the first Canadian PM in nearly 10 years. The Ford government plans an underwater transmission line through Lake Ontario.

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In currency markets. Against the US dollar, the Chinese yuan has firmed modestly as authorities maintain a steady policy stance and limit excessive volatility. In contrast, the Australian dollar has weakened, pressured by broader USD strength and softer risk sentiment. CNY firms 0.2%, while Asian currencies, on average, ease 0.15% against the USD. Trading currencies come under selling pressure, with AUD & NZD weakening 0.4%, SEK & NOK falling 0.25%, ZAR down 0.15%, JPY, CHF, KWD, DKK, & PLN flat, and MXN up 0.1% against the USD.

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In commodity markets. Oil prices strengthened 1.2%. Natural Gas prices rallied by 1.85%. Gold prices weakened by 0.6%. Silver prices tumbled 2.7%. Coffee prices gained 0.8%. Soybean prices eased by 0.15%, and Wheat prices firmed by 0.3%.

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CAD has eased in early trading, extending its longest daily losing streak in nearly 10 months, pressured by easing commodity prices and concerns about increased Venezuelan crude supply to the US. The loonie has weakened since late December as oil, Canada’s key export, slipped toward the mid-$50s, undermining support for the commodity-linked currency. While domestic data offered some encouragement — with the Ivey PMI returning to expansion and stronger employment momentum — it has so far failed to offset external headwinds. Canadian assets have also felt pressure, with the TSX pulling back from record highs amid declines in energy and materials stocks. Looking ahead, focus turns to Friday’s key Canadian and US jobs reports, which will be crucial for gauging relative growth momentum and near-term direction for the loonie.

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EURCAD is edging higher as the Canadian dollar remains under pressure despite oil prices rising today, with markets focused on a more negative longer-term outlook for crude. Expectations of increased supply and softer demand continue to weigh on Canada’s key export, offsetting any short-term support from today’s rebound in prices. As a result, the cross remains sensitive to broader commodity trends and upcoming Canadian and US labour data for direction.

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EUR is consolidating above the 1.1650 area, pausing its recent decline as the US dollar steadies amid cautious market conditions. Support for the greenback has come from stronger US services data, while steady ECB inflation expectations reinforce the view that euro-area rates will remain on hold. Near term, traders are reluctant to take fresh positions ahead of US jobless claims and Friday’s non-farm payrolls report, keeping the pair range-bound.

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GBPEUR has eased as the euro gains support from stronger-than-expected Eurozone data, pushing GBPEUR toward the 1.1500 area. Improved sentiment and labour market data in the euro area contrast with softer UK services activity, leaving sterling on the defensive.

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GBP has turned lower toward the 1.3450 area as a softer risk tone, and a firm US dollar on the pair ahead of key US labour market data. Stronger-than-expected US services activity has supported the greenback, while caution ahead of Friday’s non-farm payrolls is keeping sterling on the defensive. Near term, GBP/USD direction will hinge on US jobs data and how it shapes expectations for the Fed relative to the Bank of England.

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