The Morning Update

The USD firms, oil prices weaken, equity markets are up, and US yields ease ahead of the Feds rate decision. The USD is steady heading into the Feds policy decision today, with investors expecting rates to remain unchanged. Investors will be focused on Fed Chair Powells comments with many expecting President Trump's trade policies expected to boost the US economy, potentially increasing inflation, and keeping US rates higher-for-longer. Equity markets are attempting a recovery after a rough start to the week, after DeepSeek AI sparked concerns to Silicon Valley's big-spending strategy. Elsewhere, weaken as US crude inventories surge, and the threat of tariffs remain a concern for investors. Bitcoin rebounds retesting $103k, while Gold are flat, and Silver prices are up. Markets will be focused on the Fed & BoC interest rate decisions, and the BoE Governor Bailey's speech to help provide intraday direction to currency markets today.

‍

In other news. Fed looks set to repel Trump's calls for deep rate cuts. Czech central bank head wants to buy billions of euros in bitcoin. Global chipmakers rebound after Nvidia shares rally. Big majority of Greenlanders do not want to be part of US, poll finds. Baltic sea shipping tax could pay for undersea cable protection, says Estonia minister. UK backs third runway at London's Heathrow Airport. Spain's economy beat expectations in Q4/25, growing 0.8%. Trump tariffs on Canada 'still on the books' for Feb 1st,, White House press secretary Leavitt said. The weak loonie has 'panicking snowbirds looking to sell Florida, Arizona homes.

‍

In currency markets. The USD edges higher against its G10 peers as markets are widely expecting the Fed to keep interest rates on hold. CNY is flat, while Asian currencies slip by 0.1% in early trading. Trading currencies remain under pressure, with AUD weakening 0.4%, CHF down 0.2%, NZD, MXN & SEK flat, while JPY & ZAR are up 0.15% against the USD.

‍

In commodity markets. Oil prices weaken by 0.9%. Natural Gas prices tumbled by 2.2%. Gold prices are flat. Silver prices are up 0.35%. Copper prices are flat, Wheat and Soybean prices strengthen by 0.75%.

‍

CAD remains under pressure heading in to the BoC interest rate decisions, where rates are expected to drop by 25 bps. We remain bearish for the Loonie with the prospect further diverging interest rates between the Fed & BoC, the continuing pressure on oil prices, and the prospect of US tariff's as early as Feb 1st. Intraday the focus will be on the BoC & FED rate decision & respective statements to provide direction for the loonie today.

‍

EURCAD holds steady with investors sidelined ahead of today's BoE rate decision and Thursday's ECB interest rate decision.

‍

EUR falls back to 1.0400 as focus shifts to the Fed's interest rate decision. Euro slips in early trading amid a firmer USD as investors turn cautious with expectations the Fed will keep rates on hold, while the ECB is expected to ease by 25bps on Thursday. We remain bearish for euro in Q1/25 with the prospect of US tariffs on EU goods, the widening interest rate divergence between the Fed & ECB, and expectations of stronger US growth over the EU in 2025.

‍

GBPEUR holds steady heading into today's BoE Governors testimony, and the ECB rate decision tomorrow.

‍

GBP erased early gains as markets turn cautious ahead of the Fed decision & BoE Governors testimony. The pound is underperforming against the USD as investors are focused on the Fed's monetary policy decision. On a positive note, Finance Minister Reeves reiterated PM Starmer's positive outlook on the economy, saying that the economy is on the brisk of a "turnaround" and vowed to remove "stifling and unpredictable" regulations to boost productivity. Intraday, the Fed rate decision and BoE Governor's Bailey testimony will help drive direction for the pound.