The Morning Update

The USD stabilized, oil prices increased, equity markets showed mixed performance, and US yields rose as news about tariffs and Ukraine peace efforts took center stage. The USD ends the week on the back foot, down nearly 2.5% from February highs, drifting to near multi-week lows as tariff fears eased. Global equity markets are mixed; Wall Street heads for a winning week as new tariffs are delayed, while luxury stocks boosted Europe’s Stoxx 600 higher, and AI hype propelled Chinese equities to three-year highs. A strategist at Bank of America noted that faster inflation in the US could benefit markets because it would compel Trump to implement less severe tariffs. BofA’s Michael Harnett stated in a note, “Trump must go small, not big, on tariffs and immigration in the coming months to avoid fuelling a second wave of inflation.” Elsewhere, oil prices snapped a three-week losing streak as trade war fears ease. Bitcoin prices firmed almost1% to $97k, while gold prices strengthened, powered by safe-haven flows, testing fresh highs and looking set to test $3k per ounce. The focus today will be onUS Retail Sales to help provide direction to currency markets.

‍

News Headlines. UK PM Starmer says UK committed to Ukraine being 'on irreversible path' to NATO. Europe must respond to Trump 'electroshock', says Macron. China military exercise near Taiwan could be used to conceal attack, US says. Trump moves to impose reciprocal tariffs as soon as April. At the Munich summit, Vance says NATO must do more 'burden-sharing' in Europe. Thousands fired in US government as Trump, Musk purge federal workers. Ukraine accuses Russia of drone attack on Chernobyl nuclear plant. Internal trade minister says Canada 'open' to early renegotiation of trade agreement with US.

‍

In currency markets. The USD Index fell to107.00, retesting multi-week lows as tariff concerns eased. INR had its best performing week in 19-months on heavy intervention from the Indian central bank. Investors return to Euro, GBP, CAD, MXN & CNY as tariff fears ease. CNY strengthens by 0.3%, while Asian currencies gained by 0.2% on average against the USD. Trading currencies rebound, with CHF, NOK, SEK & MXN firmed 0.15%, JPY & AUD gained by 0.25%, NZD & JPY strengthened 0.35%, and ZAR rallied by 0.7% against the USD.

‍

In commodity markets. Oil prices firmed by 0.15%. Natural Gas & Wheat prices strengthened by 1.7%. Gold prices gained by 0.5%. Silver prices rallied by 4.2%. Copper prices flat, and Soybean jumped by 0.9%.

CAD continues to gain as tariff fears subside, with Trump seemingly stepping back following Wednesday's unexpected spike in US inflation levels. The CAD has strengthened to two-month highs against the USD, with the loonie increasing by 1.4% in 2025. However, the Canadian dollar is not out of the woods yet; according to Trading Economics, the loonie is forecasted to trade at 1.46 by the end of Q1, with expectations it could reach 1.48 by the end of 2025. Intraday, CAD manufacturing and wholesale sales are not expected to impact the loonie, as investors are focusing on US retail sales for market direction today.

‍

EURCAD remains stable following a turbulent week as investors anticipate news on tariffs and developments regarding peace in Ukraine.

‍

EUR remains above 1.0450 due to a softer USD and eurozone data.The euro retains its weekly gains against the USD as risk sentiment improves amid easing tariff concerns and optimism surrounding talks for peace in Ukraine. Trump has refrained from imposing new tariffs; instead, he signed a memo instructing his economics team to devise a plan for reciprocal tariffs on all countries that impose duties on US imports. Domestically, eurozone GDP grew by 0.1% inQ4, up from previously flat growth.

‍

GBPEUR edges higher, up 1% in February and nearly 3% in 2025 as the UK surprised growth in Q4 continues to support the pound.

‍

GBP extends gains towards 1.2600 as focus shifts to the US Retail Sales data. The pound has benefited from improving risk sentiment amid softening tariff threats, the prospect of Ukraine peace talks and the stronger than expected Q4/24 GDP results. Investors will be focused on the US Retail Sales report which is expected ease m/m to -0.1% vs 0.4% previously.