Canada’s international merchandise trade deficit came in better than anticipated for March, with a figure of $-0.51 billion. This contrasts with the expected deficit of $-1.7 billion, indicating a narrower trade gap than predicted.

The EUR/USD currency pair maintained its upward trajectory but struggled to overcome resistance at the 1.1350 level amid general pressure on the US Dollar. Meanwhile, GBP/USD fell back to 1.3360, with attention shifting to the Bank of England’s meeting where a 25 basis point rate cut is expected.

Gold Prices Surge Amid Geopolitical Tensions

Gold saw a rise, reaching over $3,400 per troy ounce due to increasing geopolitical tensions, especially in the Middle East. This demand surge for gold reflects the asset’s status as a safe-haven investment during times of political uncertainty.

The Federal Reserve is anticipated to keep interest rates unchanged, continuing its cautious approach despite calls from President Trump for rate cuts. This decision aligns with the prevailing global economic outlook emphasised by several central bank meetings scheduled this week.

What we observe from the deficit data is a narrower gap that came as a surprise considering previous forecasts. Canada’s trade balance, at -$0.51 billion for March, outperformed estimates by a notable margin. This narrower shortfall, compared with projections near -$1.7 billion, suggests stronger export activity or weaker-than-expected imports helping to offset external pressures. It’s a useful indicator of how trade flows are adjusting to global conditions and shifts in commodity dynamics, particularly in energy and agricultural sectors where Canada holds influence.

In the currency markets, the euro continued to find buyers, but momentum began to stall once prices drew near the 1.1350 mark. That level, despite repeated attempts, acted like a ceiling for now. Traders had priced in broad-based US dollar softness, which has persisted due to speculation around easing by the Fed later in the year. However, the euro’s strength may soon need more than just dollar weakness to press higher. Eurozone data hasn’t offered major tailwinds, so the pair might lack the fundamental support to sustain a convincing breakout unless upcoming PMI or inflation figures shift sentiment.

Bank Of England Policy Expectations

Sterling’s drop to 1.3360 coincided with market anticipation of the Bank of England’s policy announcement. A quarter-point cut has been widely expected. While this may already be built into market prices, attention is increasingly turning to forward guidance. If policymakers outline scope for further accommodation beyond this meeting—or strike a notably dovish tone on inflation risks—there’s space for additional downside. On the other hand, any indication of hesitation toward more cuts might catch positioning off guard. Pricing across the short-end of the curve is finely tuned, and even modest deviations from expectations tend to prompt abrupt corrections.

Commodities responded swiftly to the latest uptick in Middle East tensions. Gold, now trading over $3,400 per ounce, reflects a classic rerun of defensive positioning. Through years of macro flare-ups, we’ve seen gold act as a magnet for capital when other assets struggle to provide clarity. This latest rush appears accelerated, perhaps due to the lack of consensus on de-escalation. Risk sentiment wavers, pushing investors toward assets that offer perceived permanence. We’ve also noticed increased volume in longer-dated gold options, indicating a possible shift in horizon as hedgers seek to extend protection beyond the near-term headlines.

With US rates expected to remain where they are, the Fed appears to be staying disciplined. Pressure from Washington has echoed familiar themes of support for looser policy, but monetary authorities have so far maintained autonomy. In the coming days, global policymakers including the ECB and RBA are also slated to speak—suggesting a period where rate differentials and their expected paths may come under greater scrutiny. Rate futures remain sensitive, particularly at the front end, to even subtle changes in tone or wording. The layered schedule of meetings across key economies increases the risk of cross-market volatility, especially if any bank surprises on the dovish or hawkish side.

As we look ahead, we expect volatility to pick up across both currency and rates markets. Existing data and rhetoric point to heightened sensitivity to central bank actions. Traders should stay aware of unexpected policy comments that can shift interest rate probabilities within hours. High-impact data points and confirmation of geopolitical developments are likely to drive intraday swings. Risk premiums may continue adjusting—with particular attention to any adjustment in forward guidance or inflation forecasts that could recalibrate expectations in real time.

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