The Morning Update

The USD stabilized, oil prices firmed, equity markets fell, and US yields showed mixed results amid concerns over tariffs, debt, and earnings. The USD and currency markets are sidelined ahead of the US FOMC minutes. Global equity markets and US futures are down, along with US Treasuries, as concerns about the US economy linger amid ongoing worries over tariffs and the growing US debt. The concerns are weighing on asset prices, while the Federal Reserve has paused its interest rate cuts as it awaits further economic data direction. Investors will be focused on earnings results from Nvidia, which are set to be released today after the close, with markets paying close attention to what the China restrictions will mean for the AI chipmaker. Elsewhere, oil prices have risen, but investors remain cautious, with many expecting Saudi Arabia to cut oil prices. Bitcoin prices fell 1% to $108.8k, while gold and silver prices strengthened in early trading. Intraday Investors will focus on the FOMC minutes, which will be the primary driver for markets today.

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In the news: Schwab says Lagarde discussed leaving the ECB early to head the World Economic Forum. Japan's 40-year bond sale draws the weakest demand since July. The US and Russia clash in public as the Ukraine war heats up. The Trump administration halts the scheduling of new student visa appointments. Macron navigates rocky path to recognizing Palestinian state. Carney says more movement on tariffs is needed before CUSMA talks start. India's alarm over Chinese spying rocks the surveillance industry. Stock futures are little changed as investors brace for Nvidia earnings. Ford recalls more than 1 million vehicles in the US, NHTSA says. Carney says Canada is looking to join a major European military buildup by July 1st.

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In currency markets: The JPY shrugged off weak demand for Japan's longest-tenor bonds on Wednesday, falling to its lowest level since July. The JPY has gained nearly 9% so far against the USD as investors flee to safe-haven assets. Global currencies hold steady with the absence of key economic data released ahead of today's US FOMC minutes.

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In commodity markets: Oil, Silver, Gold prices strengthened by 0.75%. Natural Gas and Soybean prices eased by 0.1%. Copper prices firmed by 0.5%, and Wheat prices rallied by 1.2%.

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CAD weakened from multi-month highs, breaching through 1.3800 amid a strengthening USD and on month-end hedging requirements. The loonie's weakness appears to be stalling as commodity prices gained in early trading and investor caution ahead of the US FOMC minutes later in the afternoon. Domestically, in the King's speech, the Liberals highlighted cutting income taxes, development fees and the GST on homes under $ 1 million and introducing legislation to eliminate federal barriers to internal trade by Canada Day. Reducing the natural resource project approval time from five to two years and boosting housing by supporting prefabricated modular home construction, among others. Today, the US FOMC will be the primary driver for the loonie.

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EURCAD is flat in early trading, sidelined ahead of Friday's German inflation report and Canada's GDP report.

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EUR continues to be capped at 1.1350 as markets steady ahead of key data releases later in the week. The euro steadies amid the fading USD recovery as investors shift their focus to the FOMC  for fresh direction. Domestically, the German unemployment rate held steady at 6.3%, despite unemployment change jumping to 34k from 11k expected in April. In the US, markets have reduced their expectations to zero chance of a Fed cut in June and reduced expectations to 25% probability of a cut in July. Investors will be focused on the FOMC minutes for further guidance on interest rate direction for the second half of 2025.

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GBPEUR is stalled due to the absence of market-impacting economic data releases, so the focus will be on Thursday's BoE Governor Bailey's speech.

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GBP finds support at 1.3450 after falling from multi-year highs on Monday amid ongoing market uncertainty. The pound bounces off daily lows as the USD loses its recovery momentum, heading into the US FOMC minutes. Domestically, investors will be focused on the BoE's Pill today to set the stage for BoE governor Bailey's comments on Thursday, for the bank's policy direction into the 2nd half of 2025. We expect the pound to hold within its current range ahead of the FOMC minutes and tomorrow's flurry of US data releases, including the Key US Durable Goods report.