The Morning Update

The USD holds steady, oil prices firm, equity markets are mixed, and US yields rise as risk sentiment stalls. The USD steadies after Friday's sell-off but struggles to make gains following the Fed Chair's dovish comments, which opened the door for a rate cut in September. US futures and European equities retreated as some investors grew cautious amid expectations of a Fed rate cut, following comments about tariffs and their impact on inflation, as well as a renewed focus on corporate profits. Markets see an 84% chance of a Fed cut in September after Powell signalled that the central bank may ease before inflation levels return to target amid a softening jobs environment. "The path ahead is not straightforward," said Daniel Murray, CEO at EFG Asset Management. "While an easier monetary policy is usually welcomed by markets, the context also matters, and there remains significant uncertainty regarding the macro and corporate environments." Elsewhere, oil prices firm on global demand, while Bitcoin prices ease to $111,600, and gold & silver prices also ease in early trading. In focus this week, Monday: US New Home Sales. Tuesday: US Durable Goods Orders, Housing Price Index, Consumer Confidence, and BoC Governor Macklem Speech. Wednesday: German Consumer Confidence survey. Thursday: CHF GDP, EU Consumer Confidence, ECB Policy Meeting Accounts, CAD Current Account Q2, US GDP, US PCE Prices & Pending Home Sales. Friday: German Retail Sales, French CPI, Italian GDP, German CPI, CAD GDP, US Core PCE price index, and Michigan Consumer Sentiment will help guide currency markets this week.

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In the news. Keurig Dr Pepper strikes Euro 16 billion deal to buy European coffee group JDE Peet's. France summons the US ambassador over antisemitism claims. Evergrande delisted after a spectacular fall. Iran's supreme leader rules out direct talks with the US. Carney praises Trump's Ukraine peace push as he visits Kyiv. Germany vows support for Kyiv despite unease about boots on the ground. Wall Street's September Fed rate cut bets still hinge on the next data. China's new mega dam triggers fear of water war in India. German business sentiment reaches its highest level in over a year. Ukraine drone hits Russia nuclear plant, sparks huge fire at fuel terminal.

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In currency markets. The USD index inches higher in early trading, causing G10 currencies to give back some of Friday's gains as markets turn cautious ahead of Friday's critical US Core PCE report, which is seen as a key matrix for the Federal Reserve.CNY is up 0.1%, while Asian currencies on average fall 0.25% against the USD. Trading currencies comes under pressure, with ZAR, SEK & NOK tumbling 0.6%, JPY, CZK, PLN & MNX weakening, DKK & CHF easing 0.25%, KWD, AUD & NZD are flat against the USD.

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In commodity markets. Oil prices firmed by 0.5%. Natural Gas prices tumbled 2%. Gold prices slipped 0.2%, Silver prices weakened by 0.9%, Copper prices are up 0.2%. Wheat prices strengthened by 0.7% and Soybean prices are flat.

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CAD weakens in early trading, following the loonies' strongest rally in over three months after the Fed Chair's dovish comments on the final day of the Jackson Hole symposium. Investors will be focused on Tuesday's Bank of Canada Governor Macklem speech for clues on the bank's direction on interest rates after last week's cooler-than-expected inflation data, which raised expectations that the BoC could resume its easing campaign. Intraday, with the absence of high-tier data releases, we anticipate the loonie will remain within its current trading range.

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EURCAD holds steady, trading flat in early trading despite stronger-than-expected German business sentiment.

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EUR eases in early trading amid a firmer USD and mixed German sentiment data. The euro slipped below 1.1700 as the USD attempted to recover following Fed Chair Powell's dovish remarks on Friday. Domestically, the German business climate and expectations beat expectations, while the current assessment came in slightly below expectations. We anticipate the euro will trade cautiously this week ahead of Friday's release of key European GDP and Inflation reports, as well as the US key Core PCE report, which will be a primary driver of the Fed's rate decision in September.

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GBPEUR holds on the sidelines with the UK off for a national holiday and caution as risk-on sentiment stalls.

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GBP falls below 1.3500 amid fresh USD demand in thin holiday markets. The pound gives back some of Friday's gains as the USD finds support, with investors turning cautious ahead of Friday's US Core Personal Consumption Expenditures - Price Index, a key guide for Federal Reserve policymakers. This week sees no high-tier UK data releases, so investors will be monitoring US economic data releases to provide direction for the pound.