The Morning Update

The USD retreats, oil prices tumble, equity markets advance, and US yields rise after Trump suspends attacks on Iran. The U.S. dollar weakens after President Trump suspended planned attacks on Iran for two weeks, easing geopolitical tensions and reducing safe-haven demand. The move has improved risk sentiment, with oil prices pulling back as concerns over supply disruptions ease. However, downside in the dollar may remain limited as markets remain cautious about the durability of the ceasefire. Global equities surge in a relief rally as a US-Iran ceasefire triggers a sharp drop in oil prices and boosts risk sentiment. The move is driven by expectations that lower energy costs will ease inflation and support central bank flexibility. However, the rally's sustainability depends on whether the ceasefire holds and oil flows normalize. Oil prices have tumbled by more than 15% following the announcement of a two-week US-Iran ceasefire, as easing supply concerns improve market sentiment. Gold prices are strengthening on renewed safe-haven demand despite the shift in risk tone. Bitcoin is also pushing higher, supported by the broader rebound in risk assets. Today sees a light economic calendar, so focus will be on the US Fed minutes for guidance to currency markets.

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News Headlines. The US and Iran have agreed to a 2-week ceasefire that will open the Strait of Hormuz. Oil tumbles and stocks surge after Iran ceasefire agreed. European bonds surge as traders trim bets on interest rate rises. Long Covid to cost the OECD economies up to $135bn a year. Israel halts Iran attacks while continuing Combat in Lebanon. Big funds pile into treasuries and AI stocks after ceasefire. Canada's Ivey PMI showed activity shrinking for the first time in four months. Toronto home sales snapped a losing streak as lower prices entice buyers. UK builders hit by record pickup in cost inflation, PMI shows.

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In currency markets. Against the U.S. dollar, currency markets are mostly rebounding as risk sentiment improves. However, the recovery remains cautious amid ongoing geopolitical uncertainty and shifting central bank expectations. Overall, USD weakness is modest, with markets remaining highly sensitive to incoming headlines. CNY gains 0.4%, while Asian currencies are up 0.2% on average, against the USD. Trading currencies mostly rebounded, with AUD weakening 0.5%, KWD, NOK, DKK, ZAR & PLN flat, CHF, NZD, JPY up 0.1%, and CZK firmed 0.2% against the USD.

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In commodity markets. Oil prices tumbled 16.1%. Natural Gas prices weakened 5.2%. Gold prices advanced 2.7%. Silver prices rallied 6.9%. Copper prices strengthened 3.25%. Coffee prices gained 0.95%. Soybean prices up 0.15%, and Wheat prices retreated 3%.

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CAD eases in early trading, pressured by weaker oil prices and a fragile domestic backdrop despite earlier gains following the US-Iran ceasefire. While easing geopolitical tensions weighed on the U.S. dollar and initially supported the loonie, upside remains limited as softer crude reduces a key pillar of support and Tuesday’s Ivey PMI highlighted economic weakness, contracting for the first time in four months. Focus now turns to Friday’s key jobs report, which is expected to provide further direction for the Canadian dollar.

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EURCAD continues to extend gains in early trading, strengthening over the past month and testing 1.6200 euro resilience contrasts with ongoing Canadian dollar weakness. The move is driven by tumbling oil prices, which are weighing on the commodity-linked loonie, alongside growing expectations of further ECB tightening supporting the euro. With CAD pressured by softer crude and a fragile domestic backdrop, the bias in EURCAD remains tilted to the upside, though still sensitive to shifts in energy markets and broader risk sentiment.

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EUR holds steady just below the 1.1700 level in early trading after rallying to fresh one-month highs, supported by a weaker U.S. dollar and improved risk sentiment following the US-Iran ceasefire. The euro remains underpinned by expectations of ECB tightening, reinforcing the recent upside momentum. However, gains may be tested by upcoming U.S. inflation data and Fed signals, which will guide the next move.

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GBPEUR gains, pushing higher from recent lows as sterling outperforms in a risk-on environment driven by the US-Iran ceasefire. The move comes despite ongoing ECB hawkish rhetoric, with euro strength capped as markets favour the pound amid improved sentiment. While policy divergence continues to offer underlying support to the euro, near-term momentum favours GBP, with the cross edging higher from the 1.1500 area.

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GBP advances above the 1.3400 level, extending gains as a sharp decline in the U.S. dollar follows the announcement of a US-Iran ceasefire and improving global risk sentiment. The move is reinforced by a collapse in oil prices and a decline in U.S. yields, which have reduced expectations for further Fed tightening. While the near-term bias remains bullish, attention now turns to FOMC minutes and upcoming U.S. inflation data for confirmation of the next directional move.