The Morning Update

The USD steadied, oil prices eased, and equity markets are mixed, with US yields rising ahead of the key US & German inflation reports.. The USD is set for its first monthly gain in 2025, fuelled by the resilience of the US economy ahead of the August 1st US trade deadline. Wednesday saw the BoJ, Fed and BoC all keep their rates on hold, with all central banks citing inflation concerns related to US tariffs. Equity markets are mixed, while US futures have rallied, supported by big tech earnings and optimism surrounding the AI boom. Copper prices continue under pressure, following the collapse on Wednesday in New York after President Trump ordered a 50% tariff on some copper imports. Elsewhere, oil prices ease as markets weigh supply risks, Bitcoin prices advance to $118,500, and silver prices tumble in early trading. In focus today, the Core Personal Consumption Expenditures - Price Index is expected to hold steady at 2.7%. Also on the economic docket, the German CPI report is expected to ease to 1.9% from 2% previously.

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In the news. Trump slams India and Russia as 'dead economies' after tariff stand-off. Fed Chair Powell strikes a hawkish tone as the Fed defies Trump's call for a rate cut. Microsoft profits soar almost 25% on boom in cloud computing. The US adds a 40% tariff on Brazil and targets the judge trying Bolsonaro. The US set a 15% tariff on South Korea imports under the new deal. Canada plans to recognize the Palestinian State, raising allies' pressure on Israel. The BoJ turns less gloomy on the economy, keeps rate-hike chance alive. China summons Nvidia over H20 chip security days after US talks. Microsoft set to hit $4 trillion market cap after earnings beat.

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In currency markets. The BoJ kept rates on hold, increasing pressure on the JPY, testing 150.00 against the USD. The euro is the biggest casualty of the USD strength, falling over 3% in July. CNY is flat, while Asian currencies slipped 0.1% on average against the USD. Trading currencies are mixed, with ZAR tumbling 0.7%, JPY weakening 0.5%, CHF, MXN, KWD, AUD, NZD & DKK flat, and SEK gained 0.2% against the USD.

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In commodity markets. Oil prices eased by 0.8%. Natural Gas Prices fell by 0.6%. Gold and Wheat prices firmed by 0.2%. Silver prices weakened by 2.3%, Copper prices tumbled by 21.8%, and Wheat prices are flat.

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CAD continues under pressure, testing fresh two-month lows, as it fell 1.5% in July amid ongoing US-CAD trade concerns and dovish BoC comments. Governor Macklem said, "Unfortunately, the sad reality is that tariffs mean the economy is going to work less efficiently. It means there's going to be less income, so there's going to be less consumption. So yes, the economy will resume growing, but it'll be on a permanently lower path, and in that sense, yes, the tariffs have a permanent effect on the economy unless they're removed. We expect the loonie to remain vulnerable to further weakness ahead of the announcement of a US-CAD trade deal.

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EURCAD edges higher in early trading as the loonie remains under pressure amid US trade uncertainty and weakening commodity prices.

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EUR steadies above 1.1400 as the single currency remains under pressure following the announcement of the US-EU trade deal. The euro has been the biggest casualty of the strengthening USD. The EU's agreement this week to 15% tariffs on US exports has cleared up some uncertainties, but at the same time, it has delivered a blow to confidence in the EU's economic growth prospects in H2-2026. With the announcement of 15% tariff's, investors have stepped back expectations of an ECB interest rate cut in 2026. Intraday, the US and German inflation reports will be the primary drivers for the euro today.

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GBPEUR continues under pressure, falling 0.7% in July as markets increasingly expect the BoE to cut rates on August 7th.

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GBP breaches 1.3250 to test 1.3200 amid increasing expectations of a BoE rate cut in August. The pound is suffering pressure from a strengthening USD and growing expectations that the BoE will cut rates on August 7th. Economists at Macroeconomics are predicting a "one-and-done" cut next week and expect inflation to hold above the BoE's target 2% through 2026 and 2027 - in contrast to the BoE's view that CPI will return to 2% in 2027.