The Morning Update

Market volatility persists as Trump backs off threats to fire Fed Chair Powell. As the trading day begins, the U.S. dollar strengthen against major currencies, while oil prices and equities are on the rise and bond yields continue to move lower. Trump’s comments sparked a 2% rally in equity futures during pre-market trading. Markets are known to dislike uncertainty, and the back-and-forth over tariffs, combined with conflicting signals about the Fed’s leadership, continue to undermine the stability investors seek. Although formal tariff negotiations with China have yet to resume, Trump stated he would be "very nice" in future talks with Beijing. It’ll be interesting to see whether Xi risks losing face or if Trump is willing to set aside his pride to move the talks forward.

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News Headlines. Marco Rubio and Steve Witkoff will miss Wednesday's London ceasefire talks, replaced by Gen. Keith Kellogg. US VP JD Vance warned he may walk away from negotiations if Russia and Ukraine don't accept the US proposal. Arab mediators are drafting a 5–7-year Israel-Hamas truce, including hostage and prisoner releases and a phased Israeli pullout from Gaza. Nine were killed in overnight Israeli strikes. Iran-backed Houthi rebels launched a rare missile strike at northern Israel early Wednesday.

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In currency markets. The JPY recovers from a one-week low, supported by US-Japan trade talks and expectations of BoJ rate hikes in 2025. Market optimism over US-China tensions also caps JPY gains. Asian currencies showed a mixed performance, with the JPY down 0.18% against the USD, while the CNY and THB gained 0.34% and 0.19%, respectively. The AUD rose 0.68% and the NZD edged up 0.14%. In emerging markets, the ZAR gained 0.16% and the MXN advanced 0.40%.

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In commodity markets. Oil rebounded 1.8% after Trump eased concerns over Fed Chair Powell and hinted at tariff relief with China. Gold prices reacted to the same news by moving lower.  Agricultural commodities are all pointing higher this morning with soybean up 0.65%, wheat 0.17% and lumber 0.08%

Current level USD Index                99.135         Up 0.22%

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USD/CAD edges up after Treasury Secretary Bessent called tariffs "unsustainable," signaling possible de-escalation. Trade talks progress, with 18 countries submitting proposals. However, rising oil prices support the CAD, limiting the pair’s upside. A record 7.3 million Canadians voted in advance polls over the long weekend, a 25% jump from 2021.

Current level USD/CAD                   1.3814            Flat

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EUR/CAD retreated after reaching a level not seen since October 2021.  

Current level EUR/CAD                   1.5746           Down 0.19%

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EUR/USD holds steady after slipping below 1.1400, down from its recent 3-year high of 1.1575. The USD rebound as Trump voiced confidence in a China trade deal and eased concerns over Fed Chair Powell’s future, despite frustration over rate decisions.

Current level EUR/USD                   1.1395            Down 0.24%

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GBP/EUR Global risk aversion continues to weigh on GBP, despite March UK inflation coming in below expectations across all measures

Current level GBP/EUR       1.1673 (0.8563)         Up 0.54%

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GBP/USD weakens after April’s UK PMI data showed a surprise contraction in business activity. Rising global uncertainty, weak domestic demand, and recession fears weighed on sentiment, with business confidence hitting a 2.5-year low.

Current level GBP/USD                   1.3298          Down 0.23%

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