The Morning Update

The USD steadies, oil edges higher, equity markets are up, and US yields rise as the US resumes attacks on Iran. The U.S. dollar steadies after weakening yesterday in the wake of the Federal Reserve's decision to leave interest rates unchanged, as investors reassess Chair Kevin Warsh's comments and the outlook for future policy. The greenback has since found support from renewed U.S. air strikes on Iranian targets, which have boosted safe-haven demand ahead of today's U.S. PCE inflation report. Global equity markets are mostly positive as strong Microsoft earnings boosted confidence that heavy investment in artificial intelligence is beginning to generate meaningful returns, helping offset concerns over higher bond yields and inflation. U.S. futures are higher, semiconductor stocks are rebounding after Samsung's upbeat outlook, and investors now turn their focus to earnings from Amazon and Apple, along with today's U.S. PCE inflation data and the Bank of England policy decision. Elsewhere, oil, gold and bitcoin are all higher in early trading, with renewed U.S.-Iran tensions and the Federal Reserve's decision to keep interest rates unchanged supporting commodity prices and broader investor sentiment. In focus today: Markets will be watching the U.S. advance Q2 GDP report, Core PCE inflation, personal income and spending, weekly jobless claims, and the Bank of England's interest rate decision, with the releases expected to provide fresh direction for currency markets.

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News Headlines. US borrowing costs hit 19-year high as Fed defies inflation fears. Meta shares tumble as Zuckerberg tries to sell his vision for AI 'agents'. US launches strikes on Iran after Trump vows to deliver 'beating'. Chinese stocks on track for worst month in a decade. Qualcomm posts shrinking sales and profits as chip costs hurt smartphone market. Warsh's stripped-back Fed communication 'already backfiring', says investors. Amazon finds cases of AI causing runaway spending on tech projects. 'Long past time' Canada moves into high-speed rail, minister says Ontario rethinks support.

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In currency markets. Against the USD, currency markets extend their gains as the greenback remains under pressure following yesterday’s Federal Reserve decision to leave interest rates unchanged and Chair Kevin Warsh’s cautious policy guidance. Renewed U.S.-Iran tensions are limiting the dollar’s losses by supporting safe-haven demand ahead of today’s U.S. PCE inflation report.

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In commodity markets. WTI -0.30% | Nat Gas -0.22% | Gold +1.00% | Silver +0.53% | Copper +2.23% | Palladium +2.46% | Coffee +1.93% | Cocoa -1.20% | Soybeans +0.25% | Wheat +3.59%

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CAD holds near multi-day highs as the U.S. dollar remains under pressure following the Federal Reserve’s decision to keep interest rates unchanged, while sharply higher oil prices continue to support the loonie. Attention now turns to today's U.S. PCE inflation report and Friday's Canadian GDP data, with the Bank of Canada's latest deliberations highlighting uncertainty over the durability of the economic recovery.

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EURCAD edges higher as stronger-than-expected German and Eurozone GDP data, together with yesterday's post-Federal Reserve weakness in the U.S. dollar, continue to underpin the euro despite firmer oil prices supporting the Canadian dollar.

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EUR holds firm around the 1.1450 level, with the single currency supported by stronger-than-expected German and Eurozone GDP data, while yesterday's post-Federal Reserve weakness in the U.S. dollar continues to provide additional support. Investors now turn their attention to today's U.S. PCE inflation report, which is expected to provide further direction for the dollar and the Fed's policy outlook.

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GBPEUR eases from four-week lows but remains below the 1.1700 level as investors await today's Bank of England policy decision, with the Bank widely expected to leave interest rates unchanged. Markets will also monitor Eurozone GDP, unemployment and consumer confidence data, while Governor Bailey's comments are expected to provide fresh direction for sterling.

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GBP steadies below the 1.3400 level as yesterday's post-Federal Reserve weakness in the U.S. dollar continues to support sterling ahead of today's Bank of England policy decision. Markets expect the BoE to leave interest rates unchanged, with investors focused on the Monetary Policy Report, MPC vote split and Governor Bailey's comments for guidance on the outlook for UK interest rates.