* President Trump halts Tuesday’s planned military attack on Iran

* UK’s Burnham rules out changes to borrowing limits if he becomes PM

* Nasdaq drops for second day as tech pullback picks up steam

* Brent topped $110 on report US viewed latest Iran proposal as insufficient

FX: USD pulled back after making six-week highs, but it found support around the 50-day SMA at 98.98. The Middle East dominated newswires and led sentiment throughout. President Trump ultimately supported the risk-on trade, causing stocks to reverse afternoon losses and the greenback to sell off. After a possible US-Iran sanctions deal was questioned, Trump said he had instructed Defence Secretary Hegseth to hold off on an Iran attack that was initially planned for today, after Saudi, the UAE and Qatar requested him to do so, due to serious talks now taking place. We sense a semblance of a TACO trade here with bond yields soaring through key elevated levels in recent days.

EUR was mid pack among its peers as buyers stepped in after five days of straight selling. The world’s most popular currency pair moved back above its 50-day SMA at 1.1646. There are several ECB speakers this week, with Chief Economist Lane potentially the first chance to hear what the ECB thinks of the recent bond market sell-off. He will need to sound hawkish with more than 75bps of ECB tightening priced into money markets this year.

GBP focus remained on the domestic political picture and PM Starmer’s future. His potential challenger Andy Burnham fully ruled out changing Chancellor Reeves’ fiscal rules if he becomes PM. He also said he is ruling out exempting defence spending from the fiscal rules to spend more on the military. Sterling jumped and was the outperformer on the day. Cable got back to the 50 and 200-day SMAs at 1.3422/26 area.

JPY moved above the 50-day SMA at 158.87 but pulled back marginally late in the day as the major neared the intervention zone. Finance Minister Katayama remarked that they are seeing speculative moves in the financial market and need to closely monitor the financial markets.

US stocks: The S&P 500 lost 0.08% to close at 7,403, the Nasdaq closed down 0.45% at 28,994 and the Dow Jones settled higher by 0.32% at 49,686. Sector performance saw seven sectors positive with energy, consumer staples, financials and real estate all rising more than 1%, while tech and industrials lagged. Alphabet made a fresh record high at $404.47 before closing very modestly higher and below last week’s highs. Nvidia closed down 1.3% ahead of its earnings release on Wednesday after the market close. CEO Huang reiterated demand for memory is outpacing capacity and China has to decide how much to protect its market. Chip stocks succumbed to profit taking with Seagate down 6.9% and Micron off 6%. Nebius sunk more than 9% after making record highs after its results last week.

Asian Stocks: Futures are mixed. APAC stocks traded in the red after Wall Street losses on Friday and President Trump’s warning to Iran and potentially more military action. The ASX 200 was lower with all sectors negative apart from energy. The Nikkei 225 pulled back from record highs amid higher oil prices and BoJ rate hike expectations. The Shanghai Composite and Hang Seng were lower after disappointing activity data with industrial production, retail sales and fixed asset investment all missing forecasts.

Gold found a bid for the first time in four days. Rising US Treasury yields paused for breath with the 10-year puling back modestly after printing at 4.63%. This saw the dollar slid too after five days of buying.

Day Ahead – UK Jobs, Canada CPI

UK jobs data set the scene for the usual mid-month data dump with inflation figures tomorrow, PMIs on Thursday and retail sales finishing off the week. Unemployment is expected to tick down one-tenth to 4.8% though there are still reliability concerns and the prior numbers were driven by people exiting the labour market, as employment growth disappointed. Average earnings (ex-bonus) are forecast at 3.1%, with the ongoing downtrend seen continuing, while CPI rises due to higher energy costs.

Canada headline CPI is forecast to rise 3.1%, up from the prior 2.4% while trimmed core is expected to remain steady at 2.2%. The data will be watched for signs that inflation is spreading through the economy, as seen in the US last week. Recent BoC commentary and guidance imply interest rates may need to rise further if energy prices remain elevated and feed into broader inflation. It also keeps the option open to lower rates if the US imposes more trade restrictions on Canada.

Chart of the Day – USD/CAD solid bounce

Dollar gains had extended for eight straight days beyond the major Fib level (38.2%) of the November/January move at 1.3733. The 50-day SMA is 1.3736. Factors driving the loonie lower and major higher have softened a little over the past few days, but USD gains have been primarily sentiment driven. 1.3758 is the midpoint retracement of the April/May drop in the USD from 1.3967 to 1.3550. The 200-day SMA sits at 1.3811 with the halfway point of the November/January move at 1.3810.