The Morning Update

The USD edges higher, oil prices rise, equity markets are mixed, and US yields firm with focus on the Fed and trade talks. The USD edged higher in early trading against safe-haven currencies as investors focused on today's US interest rate decision and the hopes of de-escalating US-China trade tensions, following the announcement of trade talks in Switzerland this weekend. US futures rose on optimism of easing trade tensions with China, while Asian shares gained after China reduced its policy rate to boost the economy. European equities dipped as the pharma sector declined after Novo Nordisk A/S cut its sales forecast. The US Treasury Secretary Bessent said the current tariff rates aren't suitable. The talks on Saturday and Sunday will center on de-escalation rather than a big trade deal, "but we've got to de-escalate before we move forward." Elsewhere, oil prices rise as investors focus on China-US trade talks and lower US output. Bitcoin rallied by 2%, while Gold & Silver prices weakened in early trading. Today's focus will be on the Fed's interest rate decision, with investors expecting US interest rates to remain unchanged, and investors focusing on the Fed's monetary policy statement for the rate outlook as US tariffs cast uncertainty over the economy.

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In the news. Pakistan says at least 26 civilians were killed in Indian strikes. The US and China will hold ice-breaker trade talks in Geneva on Saturday. Carney holds his own in the Oval Office encounter with Trump. China cuts key interest rates to 1.4%. Novo Nordisk cuts forecast after replica obesity drugs hit US take-up. Friedrich Merz wins the second vote to become Germany's Chancellor. Spacex gets FAA permission for a fivefold increase in Starship launches from Texas. Gaza hunger crisis ripples across health sector as Israeli blockade endures. Xi Jinping heads to Russia in a show of China's support for Putin as Ukraine talks stall. Carney's meeting with Trump yields no breakthroughs and no blowups.

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In currency markets. The CNY slips after its central bank lowers interest rates, while the AUD and NZD weaken on concerns China is sliding deeper into economic weakness. The CNY slips after its central bank reduces interest rates, while AUD & NZD weakened on concerns China is sliding deeper into economic weakness. INR holds steady despite the escalating tensions with Pakistan in the Kashmir region. The USD breaks three days of weakness as sentiment improves ahead of the weekend trade talks with China. CNY & Asian currencies on average slipped 0.15% against the USD. Trading currencies come under pressure, with AUD & ZAR weakened by 0.5%, NZD & CHF eased by 0.4%, SEK slipped by 0.3%, DKK & NOK down 0.2%, JPY, MXN and KWD flat against the USD.

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In commodity markets. Oil prices firmed by 0.55%. Natural Gas prices rallied by 3.6%. Gold & Silver prices weakened by 1.2%. Copper prices tumbled by 1.6%, while Wheat and Soybean prices strengthened by 1.2%.

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CAD eases from Tuesday's 7-month highs as the USD strengthens following news that the US & China will meet on Saturday in hopes of de-escalating trade tensions. Yesterday, despite a positive meeting between President Trump and Prime Minister Carney, the meeting yielded no breakthroughs in tariff relief, but Trump said he would negotiate on trade. Domestically, Canadian exports to the US slumped in March, but a surge in exports to other countries has helped offset the downward shift. The Canadian trade deficit reported a positive shift, narrowing to C$506 million. Intraday, the US interest rate decision and the following statement will be the primary drivers for the loonie.

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EURCAD continues to advance, with investors disappointed that PM Carney's meeting at the White House yielded no short-term tariff relief for Canada.

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EUR retests 1.1350, ahead of the Fed policy decision. The euro edges higher amid improving risk sentiment following the news that China & the US will meet in Switzerland on the weekend to discuss trade tariffs. Investors are expected to be sidelined ahead of the US Fed monetary policy statement for signals on the US economy amid ongoing trade tensions. Domestically, Friedrich Merz won the second vote to become the German Chancellor, easing political uncertainty in the EU's largest economy. Elsewhere, the EU retail sales missed expectations, dropping to 1.5% y/y in March, vs 1.9% previously.

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GBPEUR weakens ahead of the expected Bank of England interest rate decision tomorrow, with markets pricing nearly a 100% chance of a 25 bps easing.

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GBP holds steady against the USD, straddling 1.3350 ahead of the US interest rate decision. Investors are sidelined by the Fed and the Bank of England's interest rate decisions today and tomorrow, respectively. With the prospect of easing trade tensions between the US and China and expectations that the US will keep interest rates on hold, we expect the pound to remain on the back foot with the prospect of 1% rate cuts from the Bank of England in 2025. Intraday, the Fed comments will be the main driver for the pound today.

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