The Morning Update

The USD eased, oil prices strengthened, equity markets were mixed, and US yields rose as Fed rate expectations eased. The USD eases in early trading as softer U.S. inflation data continues to reduce expectations for further Fed tightening. July producer prices were unchanged on the month and annual PPI slowed to 4.7%, pushing the probability of a September rate hike down to around 30%, from roughly 50% a week ago. Global equity markets are mixed, with U.S. futures little changed and European shares edging lower as renewed U.S.-Iran tensions temper risk appetite. Technology shares remain supported by strong AI-related earnings, while investors await today’s U.S. retail sales data for further clues on the Fed outlook. Elsewhere, oil prices strengthen as U.S. threats to maintain an indefinite blockade of Iran revive concerns over supply through the Strait of Hormuz. Gold and Bitcoin prices fall, with higher Treasury yields weighing on gold and renewed geopolitical uncertainty dampening demand for risk assets such as Bitcoin. In focus today: Markets will be watching U.S. retail sales and the control group, followed by the University of Michigan consumer sentiment and inflation expectations, alongside Canadian manufacturing and wholesale sales, with the releases expected to provide fresh direction for currency markets.

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News Headlines. The US readies unprecedented 'economic isolation' plan for Iran. OpenAI's annualized revenue tops $40 billion ahead of IPO. Stocks churn as US threats against Iran lift crude. Carney walks a political tightrope as US trade talks approach deadline. NATO jets shoot down stray drone in Latvia as air incidents grow. Mortgage costs pushed higher by US stand-off with Iran. Venezuela and its opposition want gold back from the Bank of England vaults. Seoul soars past Dubai as the world's busiest international airport. The US accuses more than 40 countries of helping China avoid Trump's tariffs.

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In currency markets. Against the USD, currencies are mixed, with the Japanese yen remaining under pressure as it approaches the key 160 level, renewing speculation over further intervention despite reports the BoJ could raise rates as early as September. The Swiss franc has also weakened as intervention concerns encourage traders to use the low-yielding franc rather than the yen to fund carry trades, while the New Zealand dollar has rebounded as markets maintain expectations for a September RBNZ rate hike.

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In commodity markets. WTI +1.23% | Nat Gas +0.84% | Gold -0.25% | Silver -0.13% | Copper -0.37% | Palladium -0.75% | Coffee -0.05% | Cocoa -0.72% | Soybeans +0.51% | Wheat +1.76%

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CAD extends its gains, with USDCAD slipping below 1.3900 to its lowest level since June as firmer oil prices and fading expectations for a September Fed rate hike support the loonie.  However, Canada-U.S. trade uncertainty remains a key headwind, with threatened 50% U.S. tariffs on certain Canadian goods due to take effect August 19 unless ongoing negotiations produce an agreement, limiting the scope for a more sustained CAD rally.

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EURCAD eases in early trading, with higher oil prices supporting the commodity-linked Canadian dollar and pushing the cross back below the 1.1650 level. The euro remains underpinned by resilient Eurozone data, including 0.4% Q2 growth and a stronger June trade surplus, although renewed U.S.-Iran tensions and firmer energy prices favour the loonie at the margin.

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EUR holds firm above the 1.1550 level, supported by Eurozone data confirming 0.4% Q2 growth and a stronger-than-expected €8.6 billion June trade surplus. The euro is also benefiting from broader U.S. dollar weakness as softer U.S. inflation reduces expectations for an imminent Fed rate hike, with attention now turning to today’s U.S. retail sales report.

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GBPEUR edges higher, holding above the 1.1700 level, supported by resilient UK growth data and favourable UK-Eurozone yield differentials. Gains remain modest, however, as stronger Eurozone activity data and expectations for potential ECB tightening provide underlying support for the euro.

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GBP strengthens through the 1.3500 level, supported by resilient UK growth data and comments from BoE Chief Economist Huw Pill that the economic backdrop reinforces the case for higher interest rates. Sterling is also benefiting from softer U.S. inflation data, which has reduced expectations for a September Fed rate hike, with today’s U.S. retail sales report the next key focus.