The Morning Update

The USD is flat, oil prices are firm, equity markets are up, and US yields are mixed as markets trim expectations for the Fed. The US dollar remains relatively firm as Treasury yields edge higher and money markets trim expectations for near-term Federal Reserve rate cuts. With a light economic calendar in the immediate session, focus remains on Fed rhetoric, geopolitical risks and ongoing trade uncertainty to guide direction. Attention is also building toward Friday’s key US PPI release, which could further shape rate-cut expectations and near-term USD momentum. Global equities are attempting a cautious rebound, with US futures modestly higher while European stocks advance and Asian markets show mixed performance ahead of Nvidia’s earnings. Investors remain focused on whether the AI bellwether can reignite momentum in technology shares after recent volatility tied to disruption fears and heavy sector rotation. Broader sentiment is still tempered by tariff uncertainty and geopolitical risks, leaving markets sensitive to earnings results and policy signals in the days ahead. Elsewhere, oil and gold prices firmed as investors balanced geopolitical tensions and tariff uncertainty against a tentative stabilization in broader risk sentiment. Meanwhile, Bitcoin rebounded above $65,000, recovering some of its recent losses as appetite for higher-beta assets showed signs of improvement. With no key economic releases until Friday, markets will be monitoring geopolitical issues and tariff updates to help provide intraday direction.

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In the news. Trump condemns Iran's 'sinister' nuclear ambitions in the State of the Union. Washington warns Ukraine over striking US economic interests in Russia. Hegseth threatens to cut Anthropic from Pentagon supply chain in showdown with CEO. Germany wants deeper, fairer economic ties with China, Merz tells Li. Aston Martin cuts jobs by 20% as US tariffs hit. European shares hit record as HSBC raises leading target, AI disruption fears ease. Hyundai Motor to unveil multi-billion-dollar investment in South Korea. China's $112 billion cargo gap shows record US tariff evasion. Floor-crossing MP Jeneroux joining PM on trip to India, Australia & Japan.

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In currency markets. The Japanese yen slid to multi-week lows against the US dollar as reports of Prime Minister Takaichi’s reservations about further rate hikes cast doubt on the Bank of Japan’s tightening path and weighed on sentiment. Thailand’s central bank unexpectedly cut its policy rate by 25 basis points to 1.00%, citing economic pressure from US tariff uncertainty and a strong baht, while signalling openness to further easing if growth weakens further. CNY gained 0.2%, while Asian currencies are flat on average against the USD. Trading currencies are mixed, with JPY & NOK weakened 0.55%, CHF, KWD, SEK & PLN eased 0.25%, NZD, CZK, MXN & DKK are flat, and AUD & ZAR firmed 0.25% against the USD.

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In commodity markets. Oil & Soybean prices firmed 0.3%. Natural Gas, Gold & Copper prices are flat. Silver prices rallied 2.3%. Coffee prices weakened 1.15% and Wheat prices eased 0.5%.

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CAD edged off three-week lows against the US dollar and continues to straddle the 1.3700 level as weaker factory sales data and lingering uncertainty over USMCA trade negotiations weighed on sentiment. A firmer greenback, supported by resilient US data and reduced Fed rate-cut expectations, alongside softer oil prices, has kept the loonie on the defensive ahead of Friday’s key Q4 GDP release.

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EURCAD holds flat in early trade as the euro draws support from a softer US dollar amid ongoing trade-policy uncertainty. The Canadian dollar remains pressured by weaker domestic data and lingering USMCA concerns, leaving the cross largely range-bound.

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EURUSD continues to find support above 1.1750 as the US dollar eases following the State of the Union address and amid persistent trade-policy uncertainty. With no major eurozone data drivers, attention turns to Fed speakers later in the session, where any dovish lean could reinforce downside pressure on the greenback and allow the pair to extend its recovery.

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GBPEUR is flat in early trading, with sterling steady despite lingering political uncertainty ahead of a key UK by-election seen as a test for Prime Minister Starmer. While the euro has drawn some support after the EU paused its US trade deal following fresh tariff developments, renewed trade-war concerns may limit the single currency’s upside, given the eurozone’s greater exposure to global trade disruptions.

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GBP is consolidating around the 1.3500 level, holding modest gains as the US dollar softens following the State of the Union address and ongoing tariff uncertainty. However, softer UK labour market data and expectations for a March BoE rate cut continue to temper sterling’s upside, with traders awaiting fresh cues from Fed speakers and upcoming US and UK inflation data.