The Morning Update

The US dollar is trading lower, while oil prices are rising. Equities are edging upward, and bond yields remain flat. The USD starts the week lower, hitting its lowest level since December 10. Disappointing US Retail Sales and Walmart’s weak sales forecast raised concerns about consumer health. Additionally, Friday’s data stoked fears about US growth, with worries that Trump’s policies could further hurt consumer spending, contributing to the buck’s decline. Trump to hold joint press conference with Macron later this afternoon.

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News Headlines. German conservatives, led by Friedrich Merz, pledged on Monday to swiftly form a government following their victory in the national election. However, they face challenging coalition negotiations and the possibility of an obstructive parliament due to the rise of far-right and far-left parties. After his win, Merz expressed concerns about NATO's future, particularly following Trump's recent comments. He suggested exploring nuclear defense coordination with France and Britain, signaling a move towards greater European defense autonomy. On the third anniversary of Russia’s invasion, European and Canadian leaders met in Kyiv to honor Ukraine’s resilience. President Zelenskyy praised the "absolute heroism" of the Ukrainian people for their three years of resistance. For the first time since 2002, Israel deployed tanks into the West Bank, targeting Jenin. Defense Minister Israel Katz stated troops will stay in refugee camps for a year, preventing the return of 40,000 Palestinians. The Palestinian foreign ministry condemned this as a "dangerous escalation."

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In currency markets. The JPY has strengthened to a two-month high against the US Dollar as recent economic data raises concerns about the strength of the US economy. AUD continue to rise (+0.17%) against the US after Friday’s strong Australian employment figures with the NZD (+0.11%) following suits. In the Asian currencies, the CNY is flat, MYR strengthen (0.18%) against the USD. Emerging market currencies are mixed, with the MXN 0.07% stronger against the US Dollar, while the ZAR is down 0.31%.

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In commodity markets. Oil prices have seen a slight decline due to geopolitical developments, including efforts to resolve the Ukraine conflict and the resumption of oil exports from Iraq's Kurdistan region. Gold prices remain strong, trading near its all-time highs. Silver has seen a rise, reflecting strong investor interest. Copper, however, has experienced a slight decline. Wheat futures have rebounded, soybean futures are up as the market watches South American weather, while lumber futures have declined.

Current level USD Index                106.58          Down 0.04%

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USD/CAD rebounds from early losses as the US Dollar recovers, with investors overlooking weak US PMI data and growing concerns over Canada's outlook amid Trump’s tariff review.

Current level USD/CAD                   1.4215            Down 0.10%

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EUR/CAD Recent data shows a slight contraction in the Eurozone's manufacturing sector, while the resilient Canadian economy, backed by positive employment and stable commodity prices, supports the Canadian Dollar against the Euro.

Current level EUR/CAD                   1.4883            Up 0.05%

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EUR/USD The conservative party's victory in Germany's elections has bolstered the Euro, while the U.S. dollar remains subdued due to recent economic data and market sentiment.

Current level EUR/USD                   1.0467            Up 0.06%

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GBP/EUR remains range bound as strong UK retail sales and tax receipts support the British Pound, while the conservative party's victory in Germany strengthens the Euro.

Current level GBP/EUR       1.2074 (0.8282)         Flat

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GBP/USD The Bank of England's expected rate hold at 5.0% may impact GBP/USD, while weak U.S. economic data, including a Flash Services PMI of 49.7 and Consumer Sentiment index of 64.7, has contributed to the U.S. Dollar's weakness.

Current level GBP/USD                   1.2645          Up 0.14%

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