The Morning Update

The USD strengthens, oil prices steady, equity markets are up, and US yields rise after Trump downplays Fed Chair comments. The USD rebounds following Wednesday's on speculation over the future of Federal Reserve Chairman Powell, before President Trump downplayed the prospect of replacing him. President Trump, who has continued to press for lower interest rates, has made it public his frustration with the Fed's policy to keep interest rates on hold. US yields edged higher across the curve as investors expected the Fed to continue its wait-and-see approach. Global equity markets received a boost after Taiwan Semiconductor Manufacturing Co. raised its revenue growth outlook, reinforcing investor confidence in the strength of global spending on AI. Elsewhere, oil prices remain steady amid mixed global signals, while Bitcoin prices ease below $119,000, and silver & gold prices slip in early trading. In focus today, US Retail Sales will be the primary driver for markets, along with US Initial Jobless Claims and a flurry of Fed speakers, which may add to market sentiment.

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In the news. Trump raises pressure on Powell while calling firing 'unlikely." Von der Leyen's Euro 2 trillion EU budget proposal hit by chaotic infighting. The UK and Germany join forces in a push for lucrative sales of military jets and hardware. Couche-Tard scraps $46 billion bid for Japan's Seven & i. Trump says an India trade agreement is close, and an EU deal is possible. G20 finance chiefs to meet under tariff cloud in South Africa. Canada targets China with higher tariffs as part of steel industry measures. The UK unemployment hits a 4-year high of 4.7%. Canada's income gap reaches a record high, according to Statistics Canada. Trump eyes a tariff rate of 10% or 15% for more than 150 countries. Taxation in the EU budget proposal sends 'wrong signal,' German minister says.

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In currency markets. JPY eases on tariff and election anxiety. AUD weakens as Australian jobless rate hits 3.5-year highs, increasing RBA easing expectations. G20 currencies ease as the USD rebounds as President Trump steps back from comments to fire Fed Chair Powell. CNY up 0.1%, while Asian currencies on average fall 0.2% against the USD. Trading currencies come under pressure, with the AUD tumbling 0.8%, NOK, SEK, MXN & JPY weakening by 0.55%. CHF, DKK, NZD, CZK & PLN fall by 0.4% and KWD is flat against the USD.

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In commodity markets. Oil up 0.1%. Natural Gas strengthens 0.4%. Gold prices weakened 0.8%. Silver and Wheat prices fell by 0.4%. Copper and Soybean prices eased by 0.1%.

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CAD continues under pressure, holding near three-week lows after President Trump stated that he would not fire Fed Chair Powell, which led to the USD strengthening. The loonie is not being driven by economic data, but rather by Trump comments and the back-and-forth US/Canadian tariff rhetoric. Carney said that he is working through trade issues with the US, but a deal that works for Canadian workers isn't yet on the table. Following Tuesday's inflation data, which saw annual inflation holding near 3%, investors are largely pricing out the chance of a BoC rate cut at its next meeting on July 30th. Intraday, US Retail Sales will be the primary driver for the loonie today.

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EURCAD is steady in early trading, holding above 1.5900. The euro has rallied by over 6% annually and is up 1% over the last month. With the prospect of EU/US trade settlement, we expect the loonie to continue under selling pressure against the euro.

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EUR dips below 1.1600 ahead of the US Retail Sales. The euro weakens amid a rebound in the USD as tensions ease for now over Trump's firing of Fed Chair Powell. The euro continues to hold near multi-week lows amid ongoing EU/US trade negotiations and Trump's announcement of 30% tariff's heading into the August 1st trade deadline. Domestically, the eurozone inflation figures for June confirmed that inflation grew 0.3% in June, but remains in line with the ECB's target for price stability. Intraday, we expect investors to be sidelined ahead of the US Retail Sales data.

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GBPEUR strengthened after data showed a cooling in the UK jobs market, which appears to be less acute than the previous report had suggested.

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GBP is trading around 1.3400 as the USD strengthens and on mixed UK employment data. The pound outperforms its G10 peers, holding steady at 1.3400 after the UK unemployment rate rose to 4.7% in the three months to May, while the Claimant Count Rate remained steady at 4.5%. "Today's labour market report continues to paint a picture of a loosening jobs market. That said, the labour market picture looks better than it did last month," said Raja of Deutsche Bank in emailed comments. Today's Labour market report, combined with Wednesday's hotter-than-expected UK inflation levels, leaves the BoE in a challenging position on its next interest rate decision.