The Morning Update

The USD rose, oil prices rallied, equity markets moved lower, and US yields moved higher. The US dollar climbed on Friday and was on track for a weekly gain of more than 1%, supported by rising inflation pressures that reinforced expectations the Federal Reserve could raise interest rates later this year. Precious metals declined sharply on Friday, with gold and silver pressured by rising US inflation, fading hopes for Fed rate cuts, and stronger expectations of higher interest rates for longer. Bitcoin traded cautiously on Friday as investors assessed persistent inflation risks, shifting Fed rate expectations, and ongoing geopolitical tensions that continued to influence broader risk sentiment. US retail sales rose modestly in April, indicating consumer spending remained resilient despite slowing momentum and persistent inflation pressures, while no major economic data releases are scheduled for today.

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News Headlines:  President Trump left China after two days of talks with President Xi Jinping that produced no major breakthroughs on trade or Iran, despite a summit marked by strong diplomatic symbolism and public praise. The discussions remained heavily focused on the Iran conflict and the Strait of Hormuz, with both leaders agreeing that Tehran must not obtain nuclear weapons and that global energy routes should remain open. The United States is reportedly preparing to indict former Cuban President Raul Castro over the 1996 shootdown of planes operated by the humanitarian group Brothers to the Rescue. President Zelenskiy called for stronger action against Moscow after visiting the site of a deadly Russian missile strike that destroyed an apartment block in Kyiv and killed 24 people, including three children.

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In currency markets. Global currency markets were dominated by broad US dollar strength as rising inflation concerns and geopolitical tensions boosted demand for safe-haven assets, with the British pound and euro among the biggest movers lower against the greenback, while commodity-linked currencies such as the Canadian dollar also weakened despite higher oil prices. Among the biggest losers this week, the KRW dropped 2.9%, SEK 2.29%, and the HUF 2.89%.

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In commodity markets. Oil prices rallied by 3.8%. Natural gas gained 1.64%. Gold lost 2.28%. Silver dropped 7.21%. Copper sold off 4.43%. Coffee remained under pressure, down 1.52%. Soybean edged lower 0.35% while Wheat lost 0.30%.

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USD/CAD strengthened despite the rise in oil prices, as weaker Canadian employment data reinforced concerns over slowing domestic growth, while stronger US economic indicators continued to support demand for the US dollar. Ongoing geopolitical tensions in the Middle East also added to market uncertainty, keeping investors focused on inflation and global energy supply risks.

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EUR/CAD weakened as stronger oil prices supported the Canadian dollar, while cautious sentiment toward the Eurozone economy continued to weigh on the euro.

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EUR weakened against the US dollar as escalating geopolitical tensions and surging energy prices fueled concerns over rising inflation and slowing economic growth across Europe. Investors also adjusted expectations for a more aggressive European Central Bank stance as policymakers signaled growing concern that higher oil prices could further intensify inflationary pressures.

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GBP/EUR traded sideways as investors balanced UK political and inflation concerns against expectations for a firmer European Central Bank policy stance.

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GBP weakened against the US dollar as political uncertainty in the UK and rising concerns over inflation weighed on investor sentiment. Surging oil prices linked to escalating Middle East tensions also fueled expectations that the Bank of England may need to maintain a tighter policy stance to contain energy-driven inflation pressures.

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