The Morning Update

The USD remains steady, oil prices gain, equity markets rise, and US yields soften as the countdown to tariffs continues. The USD index struggles for direction ahead of President Trump’s tariffs and as investors awaitUS data releases. Global equities advanced, while US futures slipped as investors await clarity on President Trump’s upcoming tariffs. The US President is expected to announce his reciprocal tariff plan on Wednesday at 3 p.m.during an event in the White House Rose Garden, but the extent of his tariffs remains unclear. ECB President Lagarde privately warned EU leaders at a recent meeting in Brussels that they need to prepare for the worst-case scenario in which a hostile US drags the world into a destructive economic conflict. Elsewhere, gold prices test fresh record highs, Bitcoin rallies 2%, and oil prices gains on supply concerns. Alongside ongoing tariff updates, investors will focus on ECB President Lagarde's speech, CAD S&P Global Manufacturing PMI, US ISM Manufacturing PMI, and US JOLTS Job Openings to help provide intraday direction to currency markets.

In the news: Eurozone inflation dips to 2.2% in March as US tariffs loom. OpenAI closes a $40 billion funding round, the largest private tech deal on record. The Trump administration lists hundreds of barriers to US exports. Chinese state media says China, Japan, and South Korea will jointly respond to US tariffs. China launches military drills aroundTaiwan and calls its president a ‘parasite.’ Canadian Federal consumer tax ends April 1st. US stocks post worst Q1 since 2022 as tariff worries swirl. In France, Marine Le Pen banned from standing for office for 5 years. Netanyahu pushes Israel to brink of constitutional crisis.

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In currency markets. GBP inches higher as PM Starmer says US trade talks 'well advanced.' The USD index eases as investors are sidelined ahead of tomorrow's tariff announcements. Australia keeps interest rates on hold as concerns increase over trade war fears. Safe haven CHF & JPY advance in early trading. CNY weakens 0.2%, while Asian currencies on average are flat. Trading currencies are mixed, with CZK & ZAR weakening 0.3%, NZD down 0.1%, AUD, CHF & SEK up 0.2%, and JPY strengthens by 0.35% against the USD.

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In commodity markets. Oil and Wheat prices strengthened by 0.4%. Natural Gas prices tumbled 1%. Gold & Silver prices firmed by 0.3%. Copper prices rallied by 0.55% and Soybean prices up by 0.2%.

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CAD sits near two-week lows as risk sentiment wanes ahead of tomorrow’s expected increase in reciprocal US tariffs. The loonie is finding some support from the strength of rising oil and other commodity prices. We expect the loonie to remain on the back foot ahead of the April 2nd tariff announcements and today’s CAD Manufacturing PMI, US Manufacturing PMI, and US JOLTs job data.

EURCAD weakens in early trading following cautious comments from the ECB President on the prospect of US tariffs on the eurozone economy.

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EUR struggles to hold at 1.0800 amid a softer USD and mixed EU data. Investors remain cautious ahead of tomorrow's US tariff announcements, with the euro stalling at 1.0800. The tariffs are expected to impact EU growth, raise EU inflation, and trigger concerns within the EU. If trade slows and prices increase, some economists argue that rate cuts may be appropriate if inflation expectations stay within the ECB interest rate band.  Intraday US data releases will provide direction following today’s mixed EU inflation reports.

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GBPEUR edges higher in early trading as investors expect the impact of US tariffs to have a lesser impact on the UK economy.

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GBP holds steady above 1.2900 as investors remain cautious ahead of US tariff announcements. The pound remains steady as investors stay optimistic that the UK and the US will conclude a trade deal, preventing negative impacts on the UK economy from the proposed US global tariffs. “Our sense is that the UK escapes the worst excesses of tariffs, largely due to a relatively benign trade position with the US.” Said Sharma, forex strategist of BofA. The focus shifts to the US Manufacturing PMI and JOLTs jobs reports, which will help provide intraday direction for the pound today.

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