The Morning Update

The USD rebounds, oil prices rally, while equity markets and US yields are mixed, with markets remaining wary amid the Iran impasse. USD firms modestly as markets turn their attention to the FOMC decision, with the Fed widely expected to hold rates while maintaining a cautious, data-dependent stance. The greenback is supported by persistent uncertainty surrounding the Iran impasse, which continues to underpin safe-haven demand. Focus remains on Fed guidance and geopolitical developments for near-term direction. Global equities are mixed, with Asian markets trading lower while European indices edge higher in early sessions. US futures are mixed, as weakness in tech stocks offsets broader resilience following a strong rally through April. Sentiment remains cautious as rising oil prices and Middle East tensions weigh on the outlook, with investors also bracing for this week’s central bank policy decisions in the US, Canada, the Eurozone, the UK, and Japan, as well as major tech earnings. Elsewhere, Brent prices are rallying through $110 as stalled U.S.–Iran talks and continued disruption risks around the Strait of Hormuz tighten global supply expectations. Meanwhile, gold and Bitcoin are easing as higher oil-driven inflation concerns lift yields and the USD, reducing demand for non-yielding assets and pressuring liquidity-sensitive crypto markets. Intraday, focus will be on the US ADP Employment Change, Housing Price Index, Consumer Confidence and ECB President Lagarde's speech to provide direction to currency markets today, head of Wednesday's key US & CAD interest rate decisions.

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News Headlines. Wall Street banks boost Treasury holdings to the highest level since 2007. Oil prices climb above $110 for the first time in three weeks. European airlines seize on jet fuel crisis to lobby against passenger perks. The US is being 'humiliated' by Iran, says German Chancellor Friedrich Merz. Canada launches C$25bn sovereign wealth fund to boost growth. Trump is unhappy with Iran's latest proposal to end the war. UK PM Starmer faces vote on possible parliamentary probe over Mandelson. Carney promises 'good news' in the spring economic update. OpenAI-linked stocks slump on report of startup missing targets. Alberta is closing in on a carbon price agreement, sources say.

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In currency markets. Against the USD, JPY remains steady following the Bank of Japan decision, with the pair holding near recent levels after policymakers left rates unchanged while signalling a willingness to tighten further. Initial yen strength faded as Governor Ueda offered limited clarity on the timing of future hikes, keeping the currency range-bound. Focus now shifts to broader central bank decisions this week, with the Fed, ECB, BoE, and BoC all in view, while BoJ guidance and intervention risks remain key to the yen's direction.

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In commodity markets. Oil prices rally 3.45%. Natural Gas, Gold & Copper weakened 1.6%. Silver prices tumbled 2.6%. Coffee prices advanced 1%. Wheat prices strengthened 2%, and Soybean prices eased 0.2%.

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CAD eases off seven-week highs in early trading as USD safe-haven demand picks up amid stalled U.S.–Iran talks, tempering recent loonie strength. Elevated oil prices continue to provide underlying support, helping limit downside despite the firmer dollar tone. Comments from Prime Minister Carney on the launch of a C$25 billion sovereign wealth fund aimed at boosting investment in key sectors add to the domestic backdrop. Attention now turns to the Bank of Canada decision, where rates are widely expected to be held at 2.25% as policymakers look through the oil-driven inflation shock, while geopolitical developments continue to guide near-term direction.

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EURCAD inches higher in early trading, even as rallying oil prices continue to underpin the Canadian dollar and limit broader upside. The cross is edging up modestly as euro resilience offsets commodity-driven CAD strength, leaving price action range-bound. Caution prevails ahead of tomorrow’s BoC and ECB rate decisions, with both central banks expected to hold policy while guidance on inflation and energy-driven risks remains key for direction.

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EUR eases against the USD, with the single currency straddling the 1.1700 level as renewed risk aversion supports the dollar. Uncertainty surrounding U.S.–Iran talks is underpinning safe-haven demand, keeping the pair on the defensive in early trade. Focus now turns to the Fed and ECB policy decisions this week, where both are expected to hold rates, with attention on forward guidance. ECB President Lagarde, in her speech today, is likely to maintain a cautious stance while keeping the option of further tightening open if inflation risks persist.

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GBPEUR holds steady in early trading, with the cross hovering below the 1.1550 area as markets remain in wait-and-see mode. Sterling is supported by expectations of a steady Bank of England, with scope for a more hawkish tilt if inflation risks persist. Focus now turns to the BoE and ECB rate decisions, where both are expected to hold policy, with guidance—particularly from ECB President Lagarde—key for shaping expectations around future tightening.

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GBP eases against the USD, with the pound slipping below 1.3500 as risk aversion linked to the U.S.–Iran stand-off supports the dollar. Sterling remains under pressure amid uncertainty about the Bank of England's outlook, despite relatively firm domestic data. Focus now turns to the Fed and BoE policy decisions, where both are expected to hold rates, with guidance—particularly from Governor Bailey—key for shaping expectations on the timing of any future policy move.

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