The Morning Update

The USD weakens, oil prices drop, equity markets are down, and US yields are mixed amid increasing Middle East and trade tensions. The USD index nears its weakest level since 2022 as rising Middle East tensions fuel risk-off sentiment. US futures and global equities are down after President Trump said that the U.S. will pull some personnel from the Middle East amid rising tensions with Iran. President Trump said, "It could be a dangerous place," adding that the US would not allow Iran to have nuclear weapons. High-level talks between the US and Iran over Tehran's nuclear program are scheduled to resume on Sunday in Oman. President Trump also ratcheted up trade uncertainty with remarks that he intends to impose unilateral tariffs on dozens of US trading partners in the coming weeks. Elsewhere, oil prices eased from two-month highs as markets reassessed increasing Middle East tensions and their impact on output. Bitcoin and silver prices ease, while gold prices strengthen after the softer US inflation report and investors' return to safe-haven products. Alongside the ongoing Middle East tensions and trade uncertainty, investors will be focused on US PPI ex Food & Energy and US Jobless claims to help provide intraday direction to currency markets.

‍

In other news. Trump says US military families can leave parts of the Middle East. The UK economy has shrunk by the most since 2023, as the US tariffs hit. US tariffs may have ended the BoJ's rate-hike cycle, former policymaker says. The G7 tries to avoid Trump conflict by scrapping the joint communique. Pentagon launches review of AUKUS nuclear submarine deal. Air India Boeing 787 heading to London crashes after takeoff. Canada-US talks on economic and security deal intensify. Couche-Tard sees 'clear path' to Seven&i deal with US stores divestment. German economic institutes raise growth forecasts. NI leisure centre hosting immigrants attacked on 3rd night of violence.

ing

In currency markets. Bulls load up on Asian currencies as trade uncertainty knocks the USD, reports a Reuters poll. The USD tests fresh 2025 lows, as the increasing Middle East tensions put pressure on the USD. CNY and Asian currencies on average strengthened by 0.25% against the USD. Trading currencies are mixed, with ZAR tumbling 1%, CHF weakening 0.3%, NZD & KWD flat, AUD & PLN up 0.15%. JPY & NOK are gaining 0.35%, CZK, DKK, & CHF are strengthening 0.55%, and SEK is rallying 0.7% against the USD.

‍

In commodity markets. Oil weakened by 1.5%. Natural Gas prices rallied 2.5%. Gold prices strengthened by 1.25%. Silver & Soybean prices fell 0.5%, Copper prices eased by 0.4%, and Wheat prices firmed by 0.15%.

‍

CAD extends gains towards eight-month highs following Wednesday's oil price rally and the softening of the USD amid increasing Middle East tensions. CTV sources say that the US and Canada are intensifying talks for an economic and security deal, with the framework for such an arrangement trading hands between the two parties. Investors will monitor the G7 from June 15th to 17th for possible updates on trades as Carney and Trump meet in Alberta. Intraday, the US PPI and jobs data will help guide direction for the loonie.

‍

EURCAD extends gains as investors favour the EUR amid weakening commodity prices and hawkish ECB comments.

‍

EUR extends gains through 1.1550, amid a softening USD. The euro rallied towards 1.1600, approaching levels not seen since 2021, as the USD comes under sustained weakness on increasing dovish Federal Reserve bets. Markets are now pricing in a 70% chance that the Fed will resume its rate-cutting cycle in September. Domestically, the ECB has turned hawkish, with ECB President Lagarde saying earlier in the month that interest rates are nearing their neutral level, which is providing an underlying support to the single currency.

‍

GBPEUR tumbles after the UK economy suffers its worst monthly contraction since 2023.

‍

GBP holds steady against the USD, giving back early gains following the disappointing UK GDP report. The UK economy contracted in April by 0.3%, which is weaker than expected, as businesses cut jobs and cancelled investment plans in response to higher taxes and uncertainty. The weaker growth and employment reports are expected to revive expectations for the Bank of England to cut rates multiple times this year, increasing selling pressure on the pound. Focus will be on the US PPI & Jobs to help guide the pound.

‍