The Morning Update

The USD extends gains, oil prices weaken, while equity markets and US yields are mixed after the interim deal to end the US-Iran war. The U.S. dollar remains near a two-month high after the Federal Reserve's hawkish hold reinforced expectations of another rate hike before year-end. The Dollar Index (DXY) climbed to its strongest level since late March as higher U.S. rate expectations continued to support demand for the greenback. Global equities trade mixed as investors balance easing geopolitical tensions in the Middle East against the prospect of higher-for-longer U.S. interest rates. While lower oil prices and a preliminary U.S.-Iran peace agreement support risk sentiment, caution persists after the Federal Reserve signalled that additional rate hikes remain possible this year. U.S. futures are higher, while performance across European and Asian markets remains uneven. Elsewhere, oil prices weaken to their lowest levels since the start of the Iran conflict, as the signing of a preliminary U.S.-Iran peace agreement eases concerns over supply disruptions through the Strait of Hormuz. Gold prices tumble as safe-haven demand recedes and investors shift back toward risk assets, while Bitcoin holds steady amid improving market sentiment. In focus today: the UK Interest rate decision, and US Initial Jobless Claims and the Philadelphia Fed Manufacturing Survey will help guide intraday currency markets.

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News headlines. US and Iran sign deal as Trump vows to release frozen funds and ease sanctions. Fed officials tilt towards rate rise as Kevin Warsh era begins. Germany backs French push for US-style tariffs and quotas. Anthropic chief tells G7 leaders to 'resist the temptation to splinter' over AI. BA owner warns EU competition rules make easyJet bid 'very difficult'. Oil falls to the lowest level since the start of the Iran war after a ceasefire deal is signed. Hegseth announces review of US troops in Europe, scorns some allies. Trump says he would prefer to see CUSMA 'terminated'. Canada's population drops in the first quarter of 2026.

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In commodity markets. Oil -2.60% | Nat Gas +0.29% | Gold -2.12% | Silver -3.51% | Copper -1.69% | Palladium -2.54% | Coffee +0.08% | Cocoa -0.53% | Soybeans -0.36%

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In currency markets. Currency markets remain under pressure against the U.S. dollar after the Federal Reserve signalled that additional rate hikes remain possible this year. The Dollar Index (DXY) is holding near a two-month high and its strongest level since late March, supporting broad-based dollar strength. Meanwhile, the yen remains near multi-decade lows, keeping intervention risks firmly in focus.

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CAD holds near a seven-month low against the U.S. dollar as the Federal Reserve's hawkish policy outlook boosts demand for the greenback and reinforces expectations of higher U.S. interest rates. Sentiment toward the loonie has also been pressured by weaker oil prices and renewed trade uncertainty after U.S. President Donald Trump said he would prefer to see the USMCA/CUSMA trade agreement terminated. Attention now turns to Friday's Canadian retail sales report, which could provide fresh insight into the strength of the domestic economy and the outlook for monetary policy.

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EURCAD eases in early trading as the euro comes under pressure from a stronger U.S. dollar and concerns over sluggish growth in the Eurozone. However, losses remain limited as the Canadian dollar continues to face headwinds from weaker oil prices and recent trade uncertainty. As a result, EUR/CAD remains near multi-month highs despite the modest pullback.

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EUR remains under pressure below 1.1500 as the U.S. dollar continues to draw support from the Federal Reserve's hawkish policy outlook and rising expectations of a rate hike later this year. While the euro is finding some support from the ECB's tightening bias, stronger U.S. yields and concerns over weak growth in Germany are limiting upside momentum. Investors now await further economic data and central bank guidance for clues on the next direction for the single currency.

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GBPEUR steadies near 1.1560 after stronger-than-expected UK employment data provided some support for the pound ahead of the Bank of England's rate decision. However, gains remain limited as investors expect the BoE to leave interest rates unchanged while the euro continues to benefit from the ECB's recent rate hike and hawkish policy stance.

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GBP trades lower ahead of the Bank of England's rate decision as softer inflation data, easing energy prices, and signs of slowing economic growth reduce expectations for further policy tightening. Markets expect the BoE to leave rates unchanged, with investors focused on the voting split and any hints that policymakers are adopting a more dovish stance. Meanwhile, the U.S. dollar remains supported by the Federal Reserve's hawkish outlook and expectations for another rate hike later this year.

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