The Morning Update

The USD remains steady, oil prices are rising, equity markets are up, and US yields are increasing due to tariff news. The USD stands strong against its G10 peers as investors process the latest tariff remarks from President Trump. Global equity markets have edged higher, while US futures have risen, recovering from Friday’s losses, particularly with shares in aluminum and steel companies responding to the tariff news. President Trump’s intention to announce a 25% levy on steel and aluminum has increased investor caution ahead of Fed Chair Powell’s semi-annual congressional testimony.Elsewhere, natural gas prices have risen to a two-year high, Bitcoin has strengthened towards $98k, and both gold and silver prices have increased. In focus this week, on Monday, ECB President Lagarde will testify to the EU Parliament. Tuesday,Fed Powell Testimony & BoE Governor Speech. Wednesday, US CPI, Fed Chair Testimony. Thursday German Inflation report, UK GDP, CHF CPI, and US PPI.Friday, EU GDP, and US Retail Sales will help drive direction for currency markets this week.

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News Headlines. Trump plans to impose 25% tariffs on steel & aluminum imports. Paris AI summit draws world leaders and CEOs eager for technology wave. China's consumer inflation at 5-month high, producer deflation persists. Japan runs record current account surplus in 2024 on foreign investment returns. South Africa's land act targets a stark divide, Trump and Musk oppose it. Marriages in China plunge by a record in 2024, fanning birthrate concerns. Kosovo's ruling party set to win election but lose majority. Germans worried about economic malaise ahead of election, survey finds. Trump doubles down on annexation threat, says Canada would be 'cherished state'.

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In currency markets. The USD holds steady, while ZAR, CAD & MXN all eased on US tariff threats. CNY weakens by 0.25%, while Asian currencies eased on average by 0.1% against the USD. Trading currencies are mixed with JPY weakening by 0.55%, ZAR & MXN eased by 0.25%, CHF dipped 0.1%, NOK flat, NZD & SEK firmed by 0.15%, and AUD strengthened by 0.3% against the USD.

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In commodity markets. Oil & Gold prices strengthened 1.4%. Natural Gas prices rallied by 4.1%. Silver prices gained by 1%. Copper prices firmed by 0.7%, while Wheat prices weakened by 0.75% and Soybean slipped by 0.1%.

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CAD weakened in early trading following President Trump's new tariff threats. The President indicated he would announce 25% tariffs on all steel and aluminum imports into the US today, with reciprocal tariffs set to be applied on Tuesday or Wednesday. These will impact all countries and match the tariff rates imposed by each nation. The ongoing threat of tariffs will continue to keep pressure on the loonie.

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EURCAD strengthens as the fresh threat of tariffs on Canada put the loonie on the back foot.

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EUR holds above 1.0300 on EU Sentix data and ahead of ECB Lagarde's speech. The USD holds steady in early trading, while the euro got a bump from the better than expected EU Sentix investor confidence which improved to -12.7, up from -17.7 in January. Focus will shift to ECB President Christine Lagarde when she delivers the the annual report at the European Parliament. The ongoing uncertainty surrounding the EU/US trade relations is expected to cap gains for the euro.

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GBPEUR strengthens as trade concerns for the EU against the USD is keeping pressure on the single currency.

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GBP outperforms as investors look beyond dovish BoE outlook. The pound outperforms the USD and G10 peers as the UK remains outside the US tariff crosshairs, helping the pound retest 1.2400 against the USD. The Bank of England Pill's comments that he sees strong wage growth as a major reason behind cautious interest rate guidance. Investors are expected to be sidelined ahead of BoE Bailey's speech on Tuesday and Fed Powell's testimony on Tuesday & Wednesday to provide further guidance for the pound.

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