The Morning Update

The USD holds steady, oil prices firm, equity markets are mixed, and US yields rise on quiet month-end trading. The USD consolidates the previous week's gains, and oil prices are on pace for their biggest monthly gains in over a year, while global equity markets struggle for direction after the latest commentary from central bankers on interest rates. ECB president Lagarde told Le Figaro newspaper the ECB could hike again, even if it pauses in at its next meeting. China's economic activity fell again in July with manufacturing contracting again and the services sector weakening, as Beijing promises more stimulus to boost consumption. Eurozone inflation fell in July, while the economy shows growth activity showed growth in the second quarter of 2023, bringing some positive news to the region. In focus this week Apple & Amazon earnings, Tuesday Australia Rate Decision, Eurozone PMI, UK PMI, US Construction Spending, ISM Manufacturing. Thursday, China PMI, UK BOE Rate decision, US initial Jobless claims, ISM Services. Friday US Unemployment Rate & US Nonfarm Payrolls.

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In other news. The Bank of Japan flags broadening prices, and wage hikes in the wake of policy tweak. Heineken NV slumped as much as 6.4% after the Dutch brewer reduced its earnings forecast. Hong Kong's economy grows much less than expected. The SEC asked coinbase to halt trading in everything except bitcoin, CEO says. UK mortgage approvals rise unexpectedly, despite BoE raising interest rates. Toyota to boost EV development and technology in China. The biggest hurdles to China's entry into the trans-Pacific trade pact are political.

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In currency news. Japanese Yen tumbles in early trading, but remains set to finish July in positive territory for the first time in 3-months after the BOJ looks set to loosen interest rates. China's Yuan holds steady, while AUD & NZD strengthen on Beijing stimulus expectations. Russian Rouble hist 3-week lows vs USD after Moscow drone attack.

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Oil prices edge higher, on track for their biggest monthly gain in over a year on expectations that Saudi Arabia will extend voluntary output cuts into September. The CAD rebounded from two-week lows in early trading on a combination of strengthening oil prices and expectations of more China stimulus to end the month flat vs USD. CAD remains caught within a 1.3170-1.3250 trading range, with the absence of any key data releases today we anticipate the loonie stall near 1.3200 on month-end flows.

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EURCAD steadies near 1.4600 as higher commodity prices are offset by better-than-expected Eurozone data and ECB's hawkish tones continue to provide underlying support to Euro.

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Euro extends towards 1.1050 after EU data and a hawkish ECB. Euro edges are higher in early trading, as Eurozone GDP grew at 0.6% y/y in Q2, while Core HICP inflation is steady at 5.5% in July. In an interview with Le Figaro newspaper, European Central Bank President Lagarde said that the ECB could hike again, even if it pauses at its next meeting. The combination of improving data, the hawkish ECB comments, and increasing China stimulus supports improving risk sentiment which should benefit Euro into August.

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GBPEUR slips in early trading seeing the currency cross ending the month flat at 1.1630 as the focus shifts to the BoE's interest rate decision on Thursday.

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GBP is flat in early trading, but looks set to end July up +1% vs USD for July. The pound holds steady heading into a key week with investors focusing on the BoE interest rate decision on Thursday and Friday's key US Nonfarm payroll report. Traders have cut their best on a continuing rally in the pound ahead of Thursday's BoE interest rate decision after domestic inflation levels slowed more than expected in June. We expect the pound to be sidelined today to finish July up +1% vs USD with the absence of key US data today.

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