The Morning Update

The USD steadies, oil prices extend gains, equity markets and US yields are mixed amid ongoing US tariff negotiations. Currency markets are muted, with the USD holding near Monday's five-week high, and the euro remaining under pressure after its worst trading day in over two months, as investors' focus shifts to the US-China trade talks in Stockholm. Asian equities ease, while European markets post modest gains as positive earnings news offsets some investors' concerns about the China-US tariff negotiations. "Today's reassuring results are somewhat compensating the concerns one can have on the impact of the US tariffs on the European economy," said Derambure, at Amundi SA. Elsewhere, oil prices extend gains amid US rate and economic uncertainty. Bitcoin strengthens by 0.85% to $ 118,900, while gold and silver post modest early gains. Investors are expected to remain cautious ahead of the US, Canada and Japanese rate decisions on Wednesday. In focus today, the US Housing Price Index, US consumer confidence and JOLTS jobs openings, which will help provide direction to the currency markets.

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In other news. Germany and France hit out at the EU-US deal. Trump's tariff blitz brings the US levies to their highest levels since the 1930s. ECB staff accuse Lagarde of running 'unaccountable legal fortress.' Jeep maker Stellantis reinstates financial guidance but flags 'tough decisions' ahead. Pharma giants push for tariff clarity as ambiguity threatens EU-US deal. Carney says US-Canada trade negotiations are at 'intense phase'. Apple is to shutter a retail store in China for the first time. Harper says he advised the Liberal government to move away from the US. UK Starmer recalls cabinet to thrash out peace plan for Gaza.

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In currency markets. The USD index has rallied 1.4% since the announcement of the EU-US trade deal, while the euro tumbled 1.3%. The CNY has slipped 0.1% this week against the USD as US-China negotiations begin in Stockholm. CNY is flat, while Asian currencies slip 0.1% on average against the USD. Trading currencies are mixed with PLN & BRL weakening 0.5%, CZK eased by 0.35%, NZD, DKK, ZAR, CHF, and MXN down 0.2%, and AUD & JPY eased by 0.1% against the USD.

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In commodity markets. Oil prices strengthened by 0.75%. Natural Gas prices rallied by 2.75%. Gold & Silver prices gained by 0.4%. Copper prices fell 0.2%, Wheat prices weakened by 0.9% and Soybean prices are flat.

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CAD has fallen 1% this week, holding near two-week lows due to ongoing US-Canada trade uncertainty and investor caution ahead of the Bank of Canada's decision on Wednesday. We expect the loonie to keep within its current range with investors sidelined ahead of the Fed and BoC interest rate decisions tomorrow. Intraday. In focus today, the mid-tier JOLTS Jobs, Consumer Confidence and Housing Price index may have a minimal impact on the USD if they print outside of expectations.

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EURCAD steadies above 1.5900 as investors step to the sidelines ahead of tomorrow's key US and Canadian interest rate decisions.

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EUR continues under pressure, but manages to rebound off five-week lows. The euro struggles to rally from Monday's sell-off as markets scrutinize the trade deal details, which are seen as favouring the US over the EU. France, on Monday, called the framework trade agreement a "dark day" for Europe, saying the bloc had caved in to the US with an unbalanced deal that slapped a headline 15% tariff on EU goods (Reuters). German Chancellor Merz said his economy would suffer "significant" damage due to the agreed tariffs. Elsewhere, the latest ECB survey showed that Eurozone inflation is expected to extend its downtrend for the year ahead in June to 2.6%.

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GBPEUR continues to edge higher as the euro continues under pressure following the US-EU trade agreement.

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GBP rebounds from Monday's lows ahead of the Fed's rate decision on Wednesday. The pound recovers above 1.3350 as the USD stalls, with investors turning cautious ahead of the US-China trade negotiations and tomorrow's Fed decision. The South China Morning Post reported that the US and China are expected to extend their tariff truce by another three months, which will help set the stage for President Trump's meeting with Premier Xi. With the lack of any high-tier economic data releases today, we anticipate the pound will steady within its current trading range.

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