The Morning Update

The USD edges lower, oil prices firm, equity markets are mixed, and US yields rise as bond and tech earnings weigh on the markets. The USD index hovers near four-month lows, while the euro steadies at four-month highs ahead of the ECB policy decision. US futures indicate a weaker opening for Wall Street, as higher bond yields, trade war concerns, and disappointing tech earnings create caution among investors. The global bond market selloff remains in full swing a day after the 10-year German Bund yield- a major driver of worldwide borrowing costs- experienced its largest increase since the 1990s, following the half-trillion euro shift in German defence and infrastructure spending. Bond investors are focused on the ECB meeting, anticipating a 25-bps rate cut and clues on how central banks might respond to additional spending plans. Elsewhere, oil prices recover from multi-year lows; Bitcoin continues to rebound after last week’s selloff, rising by 1%, while silver and gold prices both eased. Today's focus includes the ECB rate decision and press conference, US initial jobless claims, US non farm productivity, CAD Ivey PMI, alongside speeches from BoE's Mann and ECB President Lagarde, all of which will influence the direction of the currency markets today.

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In the news. Dow Futures dropped more than 400 points asWall Street volatility continues. Trump exempts some automakers from Canada and Mexico tariffs for one month.  EU leaders to back defence surge and support Zelenskiy after US aid freeze. Swedish government proposes to contribute fighter jets to NATO for the first time. Hamas says Trump threats encourage Netanyahu to evade ceasefire deal. Global Bond sell-off deepens as Germany jolts markets. Seven & i set to list NorthAmerican 7-Eleven store business. Canada’s first ministers pledge to remove trade barriers amid US tariff pressures. Jack Daniel's maker says Canada pulling US alcohol off shelves 'worse than tariff."

In currency markets. Investors remain bearish on Asian currencies as the Sino/US trade war intensifies. Safe haven JPY & CHF continue to strengthen, CAD & MXN both ease in early trading. CNY is flat, while Asian currencies eased by 0.2% on average against the USD. Trading currencies are mixed, with MXN weakens by 0.4% ZAR eased by 0.2% AUD down 0.15%, NZD up 0.1%, NOK firms by 0.35%, CHF gains by 0.5%, JPY strengthens by 0.7%, and SEK rallies by 0.95% against the USD.

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In commodity markets. Oil is up by 0.1%. Natural Gas prices tumbled by 1.5%. Gold, Silver and Copper weakened by 0.65%. Wheat strengthened by 0.6% and Soybean prices rallied by 0.9%.

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CAD weekly gains stall as the loonie hovers around 1.4350 due to declining commodity prices, tariff uncertainties, and the prospect of a BoC interest rate cut on March 12^th, which has heightened investor caution.The call between President Trump and PM Trudeau on Wednesday did not reverse the US tariffs, but pressure from US automakers granted them a one-month reprieve. If you have any short-term USD needs, our bias is to consider the current levels, as the loonie remains susceptible to a retest toward 1.4500. Intraday, the US data and CAD Ivey PMI will help provide direction for the loonie.

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EURCAD continues to strengthen, rallying near 5% monthly as the combination of weakening commodity prices and US tariffs continue to hurt the loonie, while the German economic growth plan has aided in boosting the euro.

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EUR maintains its position at 4-month highs ahead of the ECB rate decision. The euro continues to stand out as the shining star among G10 currencies, rallying over 4% this week and poised for its best week since 2009. Investor optimism remains strong regarding Germany’s plan for a substantial infrastructure fund and debt overhaul strategy. Attention will be on today’s ECB policy announcement, where a rate cut of 25 bps is anticipated. Investors will be especially keen on the ECB president's comments concerning the significant rally in government debt yields.

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GBPEUR continues to weaken, testing its weakest levels since January as the euro continues to strengthen from the improving outlook after Germany's announced plans to significantly boost fiscal spending.

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GBP drops below 1.2900 as focus shifts to US data. The USD is consolidating after a volatile week amid concerns over a US tariff-induced economic slowdown and decreasing investor confidence. Domestically, the CIPS UK construction PMI fell to 44.6 in February from 48.1 inJanuary, marking its weakest level since May 2020. The Bank of England appears to be maintaining its conservative approach to interest rate cuts, having cut rates for the third time in February since August. The all-sector PMI, which combines services, manufacturing, and construction, fell to a 16-month low of 50 in February. We anticipate the pound will be supported on dips, finding backing from a more hawkish BoE and the expectation that the UK will be exempt from US tariffs.

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