The Morning Update

The USD edged higher, oil prices rallied, equity markets rose, and US yields increased as the risk of a US shutdown eased. The USD remains strong amid rising trade tensions with the EU, causing the euro to continue its decline from five-month highs. The JPY weakened on expectations that the BoJ will not raise rates in May. Asian equities gained, with Chinese stocks testing their highest levels in 2025, driven by the prospect of more policy support to encourage consumption. US futures received a boost on expectations that the stopgap funding bill is set to pass, thereby avoiding a government shutdown. Elsewhere, oil prices rallied as the US tightened sanctions againstIran and Russia. Bitcoin surged 3%, reaching $82.8k, and gold prices broke through $3,000 to set a new high. Intraday will focus on the US University of Michigan consumer sentiment to provide direction for currency markets.

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In other news. The UK economy shrinks by 0.1% in January.Putin sets tough conditions for Ukraine’s ceasefire. Top Senate Democrat to back Republican bill to avert shutdown. Judge’s ordered the US government to rehire thousands of workers. Germany’s Merz concessions to Greens over ‘historic’ spending plan. Ford says high-stakes meetings with US officials are ‘productive’ and ‘positive,’ Ford says. Mark Carney will be sworn in as Canada’s PrimeMinister on Friday. Portugal's president disbands parliament, calls election on May 18. Bulgarian MPs lose seats as court finds miscount in October election. Philippines' Duterte to have first hearing at ICC on Friday.

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In currency markets. GBP weakens after the UK economy unexpectedly contracted in January. JPY weakened as the BoJ take a less hawkish stance on raising interest rates in Q2/25. CNY firms by 0.15%, while Asian currencies are flat on average against the USD. Trading currencies are mixed, with JPY tumbling 0.7%, CHF eased by 0.2%, NOK fell 0.1%, SEK firmed by 0.2%, and AUD, MXN, NZD & ZAR strengthened by 0.4% against the USD.

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CAD remains steady above 1.4400, declining nearly 2% monthly as tariff and political uncertainties persist. It has been a volatile week for the loonie; on Wednesday, we saw the BoC cut interest rates to 2.75%, and the US imposed tariffs on steel and aluminum imports from Canada. Mark Carney will be sworn in as Canada’s Prime Minister today, and he is expected to call an election soon. We expect the loonie to remain under pressure ahead of the April 2^nd retaliatory US tariffs and ongoing political uncertainties.

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EURCAD holds steady as both currencies await April 2nd tariff reprisals from the US.

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EUR edges lower towards 1.0850 due to US-EU trade tariff concerns. Investors adopt a cautious stance on the single currency ahead of the impending German spending policy and the growing US-EU trade tensions. President Trump recently posted on social media that he would seek to impose 200% tariffs on EU wine and Champagne imports. French Finance Minister Lombard remarked that Trump’s threat of tariffs was not surprising and deemed his actions as an “idiotic war.”  Intraday, we expect the euro to remain supported at 1.0850 with a light US economic calendar.

GBPEUR continues under pressure, down over 1% monthly after the UK economy unexpectedly contracted in January.

GBP faces renewed selling pressure around 1.2900 following weak UK data. Today, the UK Gross Domestic Product contracted by 0.1% in January, while UK Manufacturing Production fell by 1.5% year-on-year, and Industrial Production also declined by 1.5% annually in January. This disappointing data weighs on the pound, but the underlying weakness of the USD due to ongoing tariff concerns helps prevent further GBP weakness.

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