The Morning Update

The USD edges higher, oil prices ease, and equity markets & US yields are mixed on global growth concerns. The USD tests 6-month highs, while the CNY drops to a 16-year low on more weak China and European economic data. China's exports and imports extended declines in August on a combination of sagging overseas demand and weak domestic consumer spending. In Europe, German industrial output fell more than expected in July, and we saw a downward revision in the Eurozone GDP. The USD extended its rally to a six-month high as investors focus on higher-for-longer domestic interest rates, coupled with a continuing robust growth picture in the US. In focus today are US Initial Jobless Claims, Nonfarm Productivity, and a flurry of Fed speakers. CAD BoC Governor Macklem Speech, CAD Ivey PMI & CAD Building Permits.

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In other news. Inflation and wage growth projections fall among UK companies-FT. China stirs hope in the property market with the latest stimulus plan. Apple Inc. shares slid over 2% in premarket trading on China's plans to ban iPhones in some government agencies. Biden doubles down on emerging markets as Xi snubs G20-Reuters. European private loan market falters as corporate credit stress mounts. Lloyd's in talks with UN over new Black Sea grain insurance cover-CEO. UAW makes contract counteroffer to Ford; Stellantis to make an offer.

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In currency markets. The USD continues to dominate currency markets on a combination of a strong domestic economic outlook and higher rates for longer. JPY skids to a 10-month low on ultra-low interest rates. CNY ends domestic session at 2007 lows. INR nears record lows, the central bank steps up NDF intervention. AUD & NZD slip to near 1-year lows. CNY slips 0.2%, while Asian currencies are down 0.1% on average vs. USD. Trading currencies attempt to bounce off recent selling pressure with SEK, ZAR, NOK, and CHF down 0.1%, while NZD & JPY are up 0.2%, AUD firms 0.3%, and MXN firms 0.45%.

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Oil prices eased in early trading as worries over demand due to a seasonal slowdown and an uncertain economic outlook for China outweighed extended production cuts. CAD stalls near 6-month lows vs. USD on a combination of the contracting domestic economy, widening US/CAD interest rates differentials, and the ongoing weakness in the Chinese economy which are expected to keep selling pressure on the loonie in the near term. The focus will be on the BoC Governor's speech today after keeping rates on hold yesterday at 5%, sitting at 22-year highs as investors search for signs of future interest rate directions from the Governor's comments.

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EURCAD slips after a downward revision to EU GDP and weaker than expected German industrial output.

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Euro extends losses, testing 1.0700 after EU GDP & German Industrial data. The Euro struggles to hold above 1.0700 vs. USD after further disappointing economic releases which saw a downward revision in the EU GDP and German dropped more-than-expected, which increases the prospect of the eurozone slipping into a recession. The Euro is finding some underlying support from ECB comments on Wednesday which left the door open for an interest rate hike at next week's ECB meeting. Intraday US Jobs data and a flurry of Fed speakers including the NYK Fed Williams speech will help provide some direction to currency markets today.

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GBPEUR weakens as safe-haven flows dominate markets, and as domestic inflation levels ease which are reducing expectations on the BoE.

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GBP drops to 3-month lows vs. USD as risk-off flows put extended pressure on the pound. The USD continues to dominate as China's economic growth continues to slide while the US economy remains robust. The BoE Governor Bailey took a less hawkish tone on further UK interest rate hikes as he explained that many indicators are pointing to a fall in inflation in the UK. Governor Bailey added that they were "much nearer to peak rates" when he testified before the UK Treasury Select Committee. The break of 1.2480 opens the potential to see further GBP towards 1.2365 next.

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