The Morning Update

The dollar firmed and oil rose, while equity markets and U.S. yields traded mixed as attention turned to U.S. consumer sentiment ahead of an expected Fed cut next week. The USD edged higher Friday but is still set for a second straight weekly decline as rising jobless claims and a modest inflation uptick keep investors focused on Fed rate cuts next week. August CPI was overshadowed by the surge in claims, while in Europe the euro awaits Fitch’s verdict on France’s finances. Asian equities advanced, led by tech and chip names on AI momentum and growing confidence in near-term Fed cuts.European markets were little changed to slightly lower, with healthcare and luxury lagging while defence names outperformed amid ongoing geopolitical tensions and uncertainty in France.Energy shares drew support from firmer oil, while rate-sensitive sectors treaded water ahead of U.S. inflation data.U.S. equity futures were mixed as traders awaited the University of Michigan consumer sentiment and inflation expectations later today. Elsewhere, oil prices rose as oversupply expectations were offset by risks to output. Bitcoin extends gains towards $115,000, while gold prices are steady and silver prices rally in early trading. In focus today, the US Michigan Consumer Sentiment Index and the UoM 1 & 5 year Consumer Inflation Expectations will help provide direction to currency markets today.

‍

In the news. Poland says Russian drone incursions could not have been a mistake, contradicting Trump. Russia and Belarus start military exercise near NATO border after drone incursion. The UK launches new Russia-related sanctions targeting shadow fleet weapons suppliers. European shares slip as healthcare stocks weigh and France is in focus. The UK economy makes a weak start to the second half of the year. Canada may drop oil emissions cap as part of new climate plan. Canada names gas plant, port, mines as projects to be sped up. The TSX hits all-time high as investors cheer Canada's plan to fast-track major projects. Paramount Skydance preparing bid for Warner Bros Discovery.

‍

In currency markets. JPY is steady-to-softer today as markets look to next week’s BoJ decision and authorities keep intervention warnings on the table. AUD is holding near recent highs on a softer USD and Fed-cut bets, while SEK is broadly steady ahead of the Riksbank’s Sept. 23 policy meeting. CNY & Asian currencies eased 0.1% on average against the USD. Trading currencies come under pressure, with JPY weakening 0.45%, NZD fell 0.3%, SEK, AUD, PLN & NOK eased 0.2%, CHF, KWD, DKK, ZAR, and CZK are flat against the USD.

‍

In commodity markets. Oil prices firmed by 0.4%. Natural Gas Prices weakened by 0.85%. Gold prices are up 0.3%. Silver prices rallied by 1.6%. Copper prices gained by 0.6%, Wheat prices are flat, and Soybean prices eased by 0.2%.

‍

CAD is steady in early trading, holding below 1.3850 after briefly sliding to 1.3890 on Thursday, its weakest since Aug. 22. Gains were fueled by U.S. data—CPI rose at the fastest pace in seven months while jobless claims jumped—keeping the Fed on track to cut rates next Wednesday. Markets are also pricing a Bank of Canada cut next week, with the easing cycle seen nearing its end and only limited additional moves expected thereafter. Canadian 10-year yields eased to ~3.16%, after touching 3.13%—the lowest since May 16—on a flatter curve. Focus will be on the US consumer sentiment to help provide intraday direction for the loonie.

‍

EURCAD is consolidating near multi-year highs over 1.62 as the ECB stays steady while softer Canadian data and weak oil leave the loonie fragile ahead of the BoC on Sept 17. A BoC cut with dovish guidance would favour a retest/break of 1.6300, whereas a hawkish hold and firmer crude would tilt for a pullback toward 1.61.

‍

EUR is steady below 1.1750 in European trade ahead of today’s University of Michigan survey and next week’s Fed decision. The ECB kept rates unchanged and reiterated a data-dependent stance, with markets pricing at most one final 25 bp cut, likely in December. Political uncertainty in France and NATO interceptions of Russian drones over Poland are capping euro upside. Focus now shifts squarely to next week’s Fed meeting, which could set the near-term direction for the pair.

‍

GBPEUR is broadly flat after the U.K.’s July GDP stagnated, underscoring a soft backdrop for sterling. Germany’s August HICP at 2.1% y/y lends a mild bid to the euro, leaving the cross fractionally tilted toward EUR support.

‍

GBP slipped after flat July GDP, underscoring soft growth and sticky services inflation, while BoE survey inflation expectations hit their highest since 2019. A Fed cut next week would normally weigh on the USD, but with much already priced, any GBP/USD bounce likely be limited unless the Fed turns more dovish. With no BoE move expected on September 18, sterling rallies look shallow absent better UK data.