The Morning Update

The USD slips, oil prices firm, equity markets are up, and US yields rise as investors await the Fed Chairs' comments at the Jackson Hole symposium. Currency markets are stable, equity markets rebound from 6-week lows, energy prices rise, and US 10-year treasury yields retest November 2007 highs. Investors await the gathering of the central bank heads in Jackson Hole, with Fed Chair Powell speaking on Friday. The Fed Chair is expected to take "a more balanced tone in Wyoming, hinting at tightening cycle's end while underscoring the need to hold rates higher for longer" according to Anna Wong at Bloomberg Economics. In China, Beijing cut its one-year bench market interest rate to stimulate credit demand but kept 5-year rates unchanged to support the weakening CNY. Today's economic docket is very light and we anticipate currency markets may see some slight USD profit-taking.

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In other news. China cuts loan rate less than expected as calls grow to stimulate economy-FT. Ukraine nears deal with global insurers to cover grain ships. China urges BRICs to become a geopolitical rival to G7. European gas prices soar on Australian LNG workers' ultimatum. The Netherlands & Denmark confirm plans to provide Kyiv with the first F16s. ARM is expected to reveal its IPO plan as soon as today. Tropical storm Hilary unleashes flash floods in California. Ukraine torn by evacuation calls as Russian shells fall in the northeast. The US administration urges Americans to get the new covid-19 boosters. Canada to deploy military in British Columbia to tackle fast-spreading fires.

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In currency markets. The USD holds steady with no US economic data releases today and as investors appear sidelined ahead of the Jackson Hole meeting. CNY weakens China's economy and continues to lose momentum. Euro edges higher as risk sentiment improves. CNY weakens 0.25%, while Asian currencies are flat on average vs USD. Trading currencies are mixed with JPY weakening 0.25%, NZD & MXN slipping 0.1%, while AUD & ZAR firm 0.1%, CHF gains 0.25%, SEK strengthening 0.4%, and NOK rallying 0.6% vs USD.

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Oil prices firm in early trading as global supply tightens with lower exports from Saudi Arabia & Russia, offsetting concerns about global growth amid high-interest rates. CAD starts the week on a positive note after hitting a 10-week low of 1.3574 last week, finding support in early trading from higher energy prices, improving risk sentiment, and as some USD profit-taking emerges ahead of Fed Chairs' Powell speech on Friday. Today the US economic docket is light and CAD sees low-tier New Housing Price Index, which should have a limited impact on the loonie today.

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EURCAD holds steady as both currency pairs improve vs USD as risk sentiment improves, while the month-to-date Euro has gained 1..65% vs CAD.

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EUR retests 1.0900 as risk-on sentiment improves. Euro bounces off 5 weeks of losses in early trading as risk-on sentiment emerges despite ongoing China economic concerns as profit-taking emerges in the USD heading into Fed-Chairs speech on Friday. Domestically with no key economic data releases until Wednesday, we expect the Euro to be driven by China updates and Fed speakers, primarily focusing on Friday's Jackson Hole Symposium speech by Fed Chair Powell.

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GBPEUR is off slightly as the Euro benefits from the improving risk sentiment.

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GBP edges higher in early trading, but stalls below 1.2750 in thin markets. The pound continues to find underlying support from continuing hawkish sentiment by the Bank of England. Domestically the UK wage inflation data from last week held strong and core consumer inflation remained sticky through the summer and markets continue to price in as much as 75bps in further interest rate hikes in 2023. The Focus will be on Wednesday's UK Composite, Manufacturing & Services PMI data releases.