The Morning Update

The USD weakens, oil prices steady, and equity markets and US yields are mixed amid concerns over the ceasefire, tariffs, and the Fed. The USD comes under selling pressure, falling to its weakest level in nearly four years against the pound, as the greenback comes under pressure following Trump's latest attacks on Fed Chair Powell. Global equities are mixed as investors take a breather after the relief rally over the Iran/Israel ceasefire, and focus shifts to trade deals ahead of the US tariff deadline. US yields hold mostly firm despite reports that President Trump may fast-track his pick for the next Federal Reserve Chair. The "discussion around naming a Fed Chair early, and that Fed Chair presumably being more dovish, or willing to do a little more of what Trump wants to do in terms of cutting rates, it's all going to weigh on rates and the dollar," said Timothy Graf, at State Street Global Markets. Elsewhere, oil prices stall as investors monitor the Iran-Israel ceasefire and ongoing demand signals. Bitcoin eases to $107.5k, gold prices firm and silver prices rally in early trading. Today's focus will be on the US GDP, Initial Jobless Claims, Durable Goods Orders, BoE Governor Bailey, and a flurry of speakers from the ECB and the Fed will help drive direction to currency markets intraday.

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In the news. Fears over US debt load and inflation ignite exodus from long-term bonds. Europe's green steel ambitions falter as energy costs take toll. NATO promises historic rearmament shift in a bid to win over Trump. Trump considers naming next Fed Chair early in bid to undermine Powell (WSJ). Stock futures tick higher as S&P 500 nears new record high. Trump CIA chief says Iran nuclear program was 'severely damaged,' counters intel assessment reports. Nvidia hits record high as analyst predicts AI 'golden wave.' Hike in defence spending could mean cuts in other areas, Mark Carney warns.

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In currency markets. The USD index dropped half a percent to its lowest level since April 2022, following a Wall Street Report that Trump may announce the replacement of Fed Chair Powell as early as September. CNY is up 0.1%, while Asian currencies firmed on average by 0.2% against the USD. Trading currencies extend gains, with SEK & NZD up 0.1%, ZAR, NOK, MXN & AUD firmed 0.25%, CHF & DKK gained by 0.45%, and JPY strengthened by 0.6%.

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In commodity markets. Oil & Wheat prices up 0.1%. Natural Gas prices tumbled 2.2%. Gold & Soybean prices firmed by 0.3%. Silver prices strengthened by 1.35%, and Copper prices rallied 2.9%.

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CAD breaks through 1.3700 amid the softening USD, but continues to underperform against its G10 peers, down nearly 9% year-over-year against the GBP. Investors will be monitoring Friday's CAD Gross Domestic Product report for signs of Canada's economic health, as well as Friday's US Core PCE report, which is the Fed's preferred inflation report. Intraday, the US GDP will be the primary driver for markets today.

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EURCAD continues to strengthen, rallying over 9.5% year-over-year with the prospect that the EU will outperform Canada amid the ongoing US trade war.

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EUR extends gains through 1.1700 on further USD weakening and ahead of the US GDP report. The euro rallies to fresh multi-year highs, hitting its highest point since August 2021, and technically has room to extend to 1.1935. The EU leaders are meeting today to decide if they want to reach a quick trade agreement with the US on terms that favour Washington or to keep fighting for a better deal. Investors are likely to be cautious today ahead of the US Core PCE report on Friday. Today's focus will be on the US GDP report, and they will be monitoring a flurry of speeches by Fed and ECB policymakers for intraday direction.

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GBPEUR holds steady ahead of the EU leaders' summit and BoE Governor Bailey's speech for direction.

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GBP attempts 1.3750, setting fresh multi-year highs against the USD. The pound advances for a fourth consecutive session, testing fresh highs not seen since October 2021 amid ongoing USD weakness. Investors are cautious ahead of today's BoE Governor's speech, following Tuesday's comments from the Governor that they are starting to observe a softening in the labour market. We also heard from BoE Deputy Governor Ramsden, who said that if evidence becomes stronger that inflation will undershoot the target, the bank could accelerate rate cuts.