The Morning Update

The USD gains, oil prices strengthen, equity markets are up, and US yields rise ahead of Powell's pivotal speech. The USD & equity markets are set to finish the week higher, oil prices scale back weekly losses, and treasury yields tick higher while the more sensitive 2-year notes hold at 5%. Investors are focused on the Jackson Hole Economic Symposium, with the Fed Chair Powell's speech at 10:05 EST., with analysts mixed on the level of the hawkishness tone they expect from the speech. Markets are anticipating Powell is likely to repeat key ideas from recent central bank meetings & statements, specifically that data showing weakening inflation is welcomed, while highlighting the job isn't finished and further rate hikes are data dependent. Today also sees the Michigan Consumer Sentiment Index & UoM 5-year Consumer Inflation expectation, but the Fed Chair's speech will be the key driver for currency markets today.

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In other news. German business confidence falls to a 10-month low. Heineken exits Russia at a loss of Euro 300 mio. The US is to start training Ukrainian pilots on F-16 fighter jets. BRICS welcomes new members in a push to reshuffle world order. Thai PM makes resort island first visit, seeks tourism boost. Taiwan reports renewed reports renewed Chinese military activity, planes in 'response' zone. EU approves Pfizer's RSV vaccine to protect infants and older adults. Canada says it will join as a third party in the US-Mexico dispute over GM corn imports. UK energy bills to fall after Ofgen lowers price cap by 7%.

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In currency news. Pressure on the Euro grows as ECB rate pause talk grows louder. Safe Haven USD extends gains ahead of Fed Chair Powell's speech in Jackson Hole. ZAR extends losses ahead of Powell's speech. Turkish Lira weakens tumbles over 1% a day after the surprise rate hike. CNY is down 0.2%, while Asian currencies slip 0.1% on average vs. USD. Trading currencies are mixed with ZAR tumbling 0.8%, SEK weakening 0.25%, NZD, CHF & JPY slipping 0.2%, while AUD is flat, MXN & NOK firm 0.2% vs. USD.

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Oil prices rally +1% as inventories fall, but investors remain cautious ahead of Powell's speech. CAD remains on the back foot, holding near 10-week lows as markets remain cautious of a possible increasing hawkish tone from the Fed Chair speech today. Domestically CAD Factory Sales rose 0.7% in July, but ongoing labor disputes and the impact of wildfires will continue to impact growth in Q3. Intraday all focus remains on the Fed Chair's speech, and we expect the CAD has room for further weakness towards 1.3650 on continuing hawkish tones from the Fed.

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EURCAD continues to slip as speculation grows that the ECB may pause in September adding selling pressure on the single currency.

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EUR steadies near 1.0800 despite downbeat German IFO. Euro bounces off 1.0750 after German IFO Survey came in lower than expected, increasing speculation that the ECB may pause rate hikes at its September meeting. The USD continues to overshadow the Euro as markets remain cautious ahead of Fed Chair Powell's speech. Beyond the Fed Chair's speech, ECB President Lagarde will be speaking with Bloomberg at 4 pm EST and markets will be listening to the tone of her answers for guidance on the ECB September's meeting.

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GBPEUR holds steady ahead of Fed Chair Powell and ECB President Lagarde's comments today.

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GBP bounces off monthly lows, stalling at 1.2600 with Powell's speech in focus. The pound suffers from broad USD strength ahead of central bankers' speeches at the annual Jackson Hole Symposium. The pound is feeling the pressure as investors anticipate the BoE may pause its interest rate hikes beyond the September meeting. If the Fed Chair delivers a less hawkish tone in his speech we could see the pound rebound, but overall we continue to favor a break of 1.2550 next. Intraday the Fed Chair's speech will be the primary driver to markets.

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