The Morning Update

The USD is holding steady, oil prices extend their gains, equity markets are down, and US yields are mixed as markets focus on the US PMI reports and the Jackson Hole symposium. Currency markets remain steady, with the USD holding near one-week highs as investors monitor market-moving news from the Federal Reserve's annual symposium, which culminates with Fed Chair Powell's speech on Friday. US futures are flat after a four-day losing streak for the S&P 500 as the tech sector remains under pressure. European equities are down, snapping a three-day winning streak as investors await the Federal Reserve's gathering at Jackson Hole. "What we are seeing is profit-taking and a natural flight to quality ahead of Jerome Powell's speech in Jackson Hole," Said John Plassard at Cite Gestion. But "let's not beat around the bush: this is not the end of tech, and even less so for sticks linked to AI." Elsewhere, oil prices extended gains amid growing demand, while Bitcoin, gold, and silver prices eased in early trading. The focus will be on the Jackson Hole symposium, US S&P Global Manufacturing PMI, Existing Home Sales Change, Initial Jobless Claims, and EU Consumer Confidence, which will help provide intraday direction to currency markets.

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In the news. Russian missiles target Ukrainian cities in the largest attack in weeks. A surprise uptick in eurozone activity bolsters the case for the ECB to hold rates. China turns against Nvidia's AI chip after Lutnick's 'insulting' remarks. US oilfield services group expands Russian unit despite new sanctions. Canada cultivates Nordic ties to offset reliance on the US after Trump threats. The gap between the UK and the eurozone inflation is at its widest in nearly two years. Israel maintains military pressure on Gaza City ahead of planned offensive. Talk of boots on the ground in Ukraine sparks unease in Germany. Most Air Canada domestic and US flights are expected to take off on Thursday.

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In currency markets. G10 currencies are sidelined ahead of the Fed Chair Powell's speech on Friday, and NOK extends gains on strengthening oil prices. China said it is considering yuan-backed stablecoins to boost global currency usage. CNY is flat, while Asian currencies on average eased by 0.1% against the USD. Trading currencies are mixed, with JPY weakening 0.25%, CHF, AUD & CZK easing 0.15%, MXN, KWD, NZD, SEK, DKK and ZAR flat, and NOK rallied 0.5% against the USD.

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In commodity markets. Oil and Wheat prices rallied 1%. Natural Gas prices strengthened by 0.5%. Gold and Soybean prices eased 0.2%. Silver prices are down 0.1%, and Copper prices weakened by 0.55%.

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CAD remains under pressure, holding near three-month lows against the USD after Tuesday's higher-than-expected inflation levels, which boosted expectations that the Bank of Canada will resume its easing. Markets see a 30% chance of a BoC rate cut in September, but expectations have grown to 70% up from 55% that the BoC will cut interest rates in October. With no high-tier Canadian economic data releases today, investors will focus on a flurry of US data releases and updates from the Fed's symposium to provide direction to the loonie.

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EURCAD continues to edge higher, testing fresh multi-year highs as investors expect a greater interest rate divergence between the EBC and the BoC in Q4 2025.

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EUR stabilizes at 1.1650 as investors remain sidelined ahead of Fed Chair Powell's. Investors remain cautious as they head into the Fed symposium and Fed Chair Powell's speech on Friday. Domestically, we saw a flurry of French, German, and EU PMI data, which mostly beat expectations, with only the services PMI missing expectations. The surprise uptick in the eurozone manufacturing and composite PMI reports, rising faster than in previous months, is expected to bolster the case for the ECB to keep interest rates on hold for the remainder of 2025. Intraday, US data releases will be the primary driver for the euro.

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GBPEUR holds steady in early trading as investors focus on Powell's speech on Friday.

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GBP holds above 1.3450 after mixed UK PMI and caution ahead of the US PMI reports. The pound held its ground against the USD after the S&P Composite and Services PMI reports beat expectations and printed higher than the previous month. At the same time, the Manufacturing PMI came in lower than expected and fell below the level seen in July. The UK PMI report has been received positively by markets, providing an underlying support for the pound ahead of the US PMI reports later in the day.

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