The Morning Update

To start the day, the USD is trading lower, while oil prices are rising. Equities and bond yields are both edging lower, reflecting a cautious market sentiment. Yesterday's FOMC minutes indicated a cautious stance, with officials acknowledging economic uncertainties while maintaining a data-dependent approach to future rate decisions. The minutes reaffirmed Chair Powell's earlier statement that the Fed is in no rush to cut rates further. Meanwhile, President Donald Trump unveiled plans to impose 25% tariffs on imports that now includes lumber and forest products as well as the previously mentioned automobiles, semiconductors, and pharmaceuticals, set to take effect on April 2. On the interest front, investors are now pricing in one rate cut for 2025, with some anticipating the potential for a second.

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News Headlines. Trump spent the day attacking Ukrainian President Zelensky, calling him a "dictator" and accusing him of refusing to hold elections. European leaders swiftly criticized these remarks. Later, Zelensky responded, stating the world faces a choice: "with Putin or with peace," and announced a meeting with Washington's Ukraine envoy, Keith Kellogg, on Thursday. Hamas has handed over the bodies of Israeli hostages for the first time as part of the ceasefire deal in Gaza.

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In currency markets. The JPY remains strong as expectations rise for further interest rate hikes by the BoJ, pushing Japanese bond (JGB) to their highest levels in over a decade. The narrowing rate differential with other countries supports the JPY. The CNY rebounded PBoC kept key lending rates unchanged for the fourth consecutive month, amid yuan fluctuations and the impact of US trade policies. The USD is weaker against all major Asian currencies, with the JPY down 0.83%, MYR -0.26%, and CNY -0.34%. It also lost ground against the AUD (-0.54%) and NZD (-0.27%). In trading currencies, the USD dropped 0.5% against the MXN and 0.38% against the ZAR.

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In commodity markets. Oil prices remain strong, gaining 0.21%, while natural gas retraces 4.6%. Metals are up sharply, with gold rising 0.45%, Silver 1.1%, and Copper 1.05%. In agriculture, Wheat is up 0.65%, Soybeans 0.70%, and Lumber down 0.34%.

Current level USD Index                106.87          Down 0.28%

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USD/CAD edges lower after two consecutive days of gains, with the upside driven by concerns over US President Donald Trump's tariff plans. President Donald Trump has now included lumber and forest products in the list of goods that will be subject to tariffs starting next month, further escalating global trade tensions.

Current level USD/CAD                   1.4203            Down 0.23%

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Over the past week, the EUR/CAD has experienced a minor decline of 0.09%, and a 0.40% decrease over the past month.  The divergence in monetary policy, with the BoC adopting a dovish stance while the ECB takes a hawkish approach, is a key driver behind the fluctuations in the EUR/CAD exchange rate.

Current level EUR/CAD                   1.4833            Down 0.03%

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EUR/USD regains upward momentum, supported by broad US Dollar weakness. However, tariff threats from US President Donald Trump and ongoing geopolitical tensions may limit further gains. US data and upcoming Fedspeak remain key drivers for the pair.

Current level EUR/USD                   1.0445            Up 0.21%

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GBP/EUR remains stable, supported by stronger-than-expected UK inflation data, which could limit further Bank of England rate cuts. However, rising government borrowing costs and geopolitical tensions, particularly in Ukraine, are capping Sterling's gains.

Current level GBP/EUR       1.2075 (0.8282)         Up 0.04%

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GBP/USD has strengthened against the U.S. Dollar, driven by stronger-than-expected UK inflation data and sustained U.S. Dollar weakness.

Current level GBP/USD                   1.2610          Up 0.35%

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