The Morning Update

We're starting the day with the USD on the rise, oil pulling back a bit, and gains across both stocks and bond yields. The USD rebounds amid renewed US-China trade optimism, with Trump signaling tariff relief and progress in talks with Xi. Pressured by the US automotive industry, the Trump administration announced plans to ease tariffs by reducing duties on foreign parts used in U.S.-made cars and preventing overlapping tariffs on imported vehicles. Commerce Secretary Lutnick said the move supports domestic automakers and American workers. Mexico has agreed to transfer water to the U.S. and increase its share from shared rivers after the Trump administration threatened tariffs over a water-sharing agreement. Both countries announced the deal on Monday. The next key economic releases are U.S. GDP and Core Personal Consumption Expenditures, both due on Wednesday. While the official results are still pending, the Liberal Party has secured a fourth consecutive mandate in the Canadian elections. In his victory speech, Carney stressed the importance of Canadian unity in the face of Washington’s threats.

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News Headlines. Spain and Portugal declared a state of emergency after a power failure affected millions across the Iberian Peninsula, Belgium, Andorra, and parts of France. Iran's interior minister blamed negligence and safety lapses for the Shahid Rajaee port blast that killed at least 70 and injured over 1,000. Putin announced a three-day cease-fire in the war with Ukraine, set for May 8-11, coinciding with Russia's World War II victory celebrations. Ukrainian officials questioned the timing, stating that a true cease-fire should happen immediately, not just for a parade. Hezbollah urged the Lebanese government to do more to stop Israel’s attacks, following an Israeli airstrike on a Beirut suburb.

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In currency markets. The JPY remains weak (-0.48%) as US-China trade war hopes reduce safe-haven demand. USD/JPY holds modest gains ahead of the Bank of Japan's policy decision on Thursday. While the BoJ is expected to keep rates steady, inflation risks may prompt tightening. Geopolitical tensions and Fed easing bets limit USD gains. Asian currencies showed mixed performance, with the CNY and MYR rising 0.16% and 0.81% respectively, while the THB slipped 0.17%. The AUD fell 0.37%, and the New Zealand Dollar NZD edged down 0.19% against the US Dollar. In the emerging markets, both the ZAR and the MXN have weakened 0.20%

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In commodity markets. Crude oil prices fell (1.8%) amid U.S.-China trade tensions, raising concerns over global demand. Analysts warn that stalled trade talks and U.S. tariffs may push the global economy toward recession. Refinery shutdowns in the Iberian Peninsula also weighed on market sentiment. Gold slipped on Tuesday as easing U.S.-China trade tensions dented safe-haven demand, with spot prices down 0.8%.

Current level USD Index                99.170         Up 0.16%

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USD/CAD recovered losses as the Canadian Dollar weakened after Canada’s election. Prime Minister Mark Carney’s Liberal Party won but fell short of a majority, limiting his leverage in trade talks with U.S. President Trump. In his victory speech, Carney said the era of open global trade led by the U.S. is over.

Current level USD/CAD                   1.3847            Up 0.12%

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EUR/CAD remains in a tight range for the sixth consecutive days. The CAD is under pressure after Prime Minister Mark Carney's Liberals won re-election but failed to secure a majority, limiting his trade negotiation power with the U.S. Weaker Canadian job data also weighed on the currency, despite steady unemployment.

Current level EUR/CAD                   1.5765           Down 0.06%

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EUR/USD edged lower as the US Dollar steadied amid ongoing US-China trade uncertainty. Comments from Treasury Secretary Bessent, urging China to initiate talks, and conflicting messages from Trump and Beijing have further dimmed hopes for a near-term resolution.

Current level EUR/USD                   1.1378            Down 0.37%

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GBP/EUR is stable as the Euro weakens following dovish ECB comments. The ECB’s recent rate cut and warnings on US tariffs have increased expectations of further easing.

Current level GBP/EUR       1.1765 (0.8500)         Flat

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GBP/USD edged lower on Tuesday as markets grew more confident the Bank of England will cut rates in May. Dovish bets are fueled by easing UK inflation expectations and rising global economic tensions.

Current level GBP/USD                   1.3385          Down 0.41%

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