The Morning Update

The USD trades higher, oil prices come under pressure, equities hedge higher, and treasury yield move lower. The US Dollar gathered strength against its rivals for the second consecutive as markets assessed US data releases and news on President-elect Donald Trump's tariff plans. The FOMC minutes points to a slowdown in the disinflation trend. The USD index is nearing a two-year high.

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In other news. U.S. and Arab mediators have made some progress in their efforts to reach a ceasefire accord between Israel and Hamas in Gaza. President-elect Trump has warned that there would be “hell to pay” if the hostages are not released by January 20th inauguration. According to Gaza’s health minister, more than 46,000 Palestinian have lost their lives in the 16-month war. A Russian guided bomb attack on Wednesday killed at least 13 people and injured 113 in Ukraine's southeastern city of Zaporizhzhia.

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In currency markets. The Asian currencies are mostly losing ground on the back of a stronger USD, The CNY is trading near a 16-year low against the USD (flat on the day). The AUD (-0.22%) and the NZD (-0.23%) are facing similar headwind. In the trading currencies the ZAR is up 0.36%, while the MXN lost 0.12% against the USD.

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In commodity markets. Oil prices are ticking higher this morning (+0.17%). In the precious metal markets, gold continue to rise for the third straight day rallying 0.39%. Silver is trading 0.53% higher this morning continuing its 2025 rally (up 4.74% YTD). Copper is following suit rallying nearly 1%. In the agricultural commodities, Wheat is down 0.28%, Soybean 0.83%

Current level USD Index                           109.17             0.16%

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The USD/CAD remains under pressure on the back of the Fed’s hawkish policy shift as well as lower oil prices. Market participants are trying to evaluate the impact of Trudeau’s resignation, tariffs threat from its neighbour and the potential of a snap election.  

Current level USDCAD                              1.4385                Up 0.04%

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The EURCAD remains under pressure and trade in a narrow range after a 3-day selloff.

Current level EURCAD                               1.4823                 Down 0.03%

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The EUR/USD remains under pressure this morning on the back of a stronger greenback. German Industrial production increased by 1.5% eclipsing market expectation of 0.5%. Market participants were anticipating that the ECB could fasten its policy-easing pace to avoid risks of inflation. However, it is expected that the ECB will continue easing its monetary policy at a usual pace of 25 bps. ECB officials are confident that interest rates will return to its neutral level of +/- 2% by the summer.

Current level EURUSD                               1.0306                 Down 0.05%

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The GBPEUR remains under pressure however, the move could be restrained as market participants anticipate fewer rate cuts by the BoE this year – two cuts of 25bps are expected in 2025.

Current level GBPEUR               1.1916 (.8392)                    Down 0.57%    

The GBP continues its yesterday’s sell off fueled by a jump in UK gilt yields reflecting a weak economy. Persistent inflation and the threat of US tariffs have pushed the UK bond yields to their highest level since 1998. The House of Commons have summoned UK Treasury Minister to parliament to address the growing pressure of borrowing cost on the public finance.

Current level GBPUSD                               1.2279                 Down 0.64%

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