The Morning Update

The USD rose, oil prices retraced, equity markets are mixed, and US yields edged higher. The Greenback extended gains for a third straight session as hotter-than-expected US inflation strengthened expectations that the Fed will keep interest rates higher for longer amid persistent energy-driven price pressures. Precious metals traded mixed, with gold slipping on reduced hopes for Fed rate cuts, while silver outperformed on improving industrial demand prospects. Meanwhile, Bitcoin remained resilient as strong institutional demand helped offset pressure from elevated inflation and rising geopolitical tensions. Following yesterday’s stronger US CPI data, investors are now closely watching today’s PPI report for further clues on inflation trends and the impact of higher energy costs.

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News Headlines: Major US banks are scrambling to address cybersecurity vulnerabilities uncovered by Anthropic’s advanced Mythos AI tool, highlighting growing concerns over legacy banking systems and the accelerating pace of AI-driven cyber threats. President Trump arrived in Beijing for high stakes talks with Chinese President Xi Jinping aimed at easing trade tensions and strengthening economic cooperation amid rising geopolitical uncertainty and inflation pressures. At the same time, Trump reaffirmed that preventing Iran from obtaining a nuclear weapon remains his top priority, downplaying concerns over the conflict’s economic impact on Americans. Regional tensions intensified further after reports that Saudi Arabia carried out covert retaliatory airstrikes inside Iran in late March, marking the kingdom’s first known direct military action on Iranian soil. Meanwhile, the Milken Institute announced plans to host its first summit in Toronto later this year, highlighting Canada’s growing appeal to global investors amid its increasing political and policy divergence from the US.

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In currency markets. Global currency markets were also influenced by key non-US economic data, with weak Canadian employment figures reinforcing expectations for a more cautious Bank of Canada, ongoing UK political uncertainty weighing on sterling, and persistent Eurozone inflation supporting expectations for further ECB rate hikes. Investors are now also watching upcoming Chinese industrial production and retail sales data, along with UK GDP figures and Japanese inflation indicators, for further insight into global growth and central bank policy direction.

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In commodity markets. Oil prices are off 1.0%. Natural gas gained 0.12%. Gold dropped 0.36%. Silver edged higher 0.36%. Copper rose 1.63%. Coffee rebounded 1.65%. Soybean prices are unchanged and Wheat lost 0.08%.

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USD/CAD rose as the weaker Canadian labor market data reinforced expectations that the Bank of Canada will remain cautious on further tightening, while resilient US economic data supported the view that the Federal Reserve may keep interest rates higher for longer, boosting demand for the greenback over the loonie.

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EUR/CAD edged lower as stronger US-driven dollar sentiment and softer risk appetite pressured the euro, while the Canadian dollar found some support from elevated oil prices.

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EUR weakened as investors assessed the fallout from stalled US-Iran negotiations alongside growing expectations for further ECB rate hikes, with persistent inflation and geopolitical uncertainty reinforcing bets that the central bank will continue tightening policy in the coming months.

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GBP/EUR edged higher today as political uncertainty in the UK eased slightly after support for Prime Minister Keir Starmer helped stabilize sterling, while expectations for further ECB rate hikes and persistent Eurozone inflation continued to support the euro.

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GBP remained under pressure amid broader geopolitical tensions and concerns that a potential shift in UK leadership could lead to looser fiscal policy.

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