The Morning Update

The final trading day of the week begins with the U.S. dollar gaining strength, oil prices pulling back, equity markets on the rise, and bond yields edging lower. Once again, markets are driven more by headlines than hard data. This week, the focus has been squarely on the fate of the Fed Chair and the ongoing tariff drama. Earlier, we asked whether Xi would risk losing face by approaching the U.S., or if Trump’s ego would block any progress. That question remains unanswered. China has denied any tariff negotiations, urging Washington to stop "misleading the public"—a direct response to President Trump's claim that talks were underway. However, it seems that China has quietly rolled back retaliatory tariffs on some U.S.-made semiconductors to ease pressure on China's tech sector. China's ambassador to Canada says Beijing wants to partner with Canada to resist U.S. "bullying," praising Canada for not backing down against Trump's tariffs. He urged both countries to rally others in defending global trade rules and holding Washington accountable. U.S. Treasury Secretary Scott Bessent said India is close to finalizing a trade deal with the U.S., bypassing 26% tariffs. The agreement aims to double trade to $500 billion by 2030.

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News Headlines. The U.S. is set to offer Saudi Arabia an arms package exceeding $100 billion, with an announcement expected during President Trump’s visit in May. This follows the Biden administration's failed attempt to finalize a defense pact tied to Saudi-Israel normalization. Trump’s pressure on Ukraine and deference to Putin undermines the U.S. as a neutral peace broker. His plan, which includes ceding territory to Russia, concerns U.S. allies. Trump calls Russia’s offer to "stop the war" and not take "the whole country" a “big concession.” A senior Russian military officer was killed in a car explosion near Moscow.

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In currency markets. U.S. banking regulators announced Thursday they are withdrawing documents urging caution on cryptocurrency. The Federal Reserve is pulling back two supervisory letters that required banks to seek approval before engaging in crypto and stablecoin activities. The JPY remains weak as the pair hits a two-week high boosted by a modest USD strength and hopes of de-escalation in the US-China trade war. The USD strengthened against Asian currencies, with the JPY dropping 0.48% and the THB losing 0.38%, while gaining modestly against the CNY and MYR. Emerging market currencies also followed suit, with the MXN and ZAR both down by 0.45%.

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In commodity markets. Iran's Oil Minister announced increased cooperation with Russia in various sectors, while Russia's Energy Minister said they may supply gas to Iran this year, with pricing still to be determined.  Gold prices are lower, nearly wiping out Thursday’s gains, and are set to end the week in the red. The decline follows confusion over the U.S.-China trade conflict, with Trump suggesting talks are ongoing while China denies it. Commodities have experienced significant volatility over the past month. Oil prices dropped 11%, while natural gas fell by 25%. Gold saw a 9% gain. Agricultural commodities showed more stability, with soybeans rising 5% and wheat dipping slightly by 0.2%. Lumber, however, saw a sharp 16% price decline.

Current level USD Index                99.334         Down 0.52%

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USD/CAD pair holds a positive bias, trading near the weekly high but still below 1.3900 and close to a three-year low. The USD is supported by upbeat U.S. data and rising U.S.-Canada tensions, while political uncertainty in Canada also weighs on the CAD. Hopes for a U.S.-China trade resolution and potential Fed rate cuts could limit USD gains.

Current level USD/CAD                   1.3846            Down 0.25%

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EUR/CAD seems to have found its trading range between 1.5700 and 1.5800 as we await some economic data and perhaps some news about US-China trade talks.

Current level EUR/CAD                   1.5765           Down 0.06%

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EUR/USD trades lower around as the USD strengthens on hopes of improved U.S.-China trade relations. Market confidence grows as China considers suspending its 125% tariff on some U.S. imports.

Current level EUR/USD                   1.1357            Down 0.29%

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GBP/EUR pair loses momentum, dipping near 0.8530 as the GBP strengthens following stronger-than-expected UK Retail Sales data.

Current level GBP/EUR       1.1719 (0.8525)         Up 0.03%

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