The Morning Update

The USD firms, oil prices retreat, equity markets are up, and US yields are mixed amid ceasefire uncertainty. The USD firms in early trading, supported by lingering geopolitical uncertainty as the Iran ceasefire deadline approaches. Markets remain cautiously optimistic about a potential extension, but mixed signals around negotiations are keeping investors sidelined. Overall, the dollar is underpinned by a defensive tone, though gains remain measured amid hopes that diplomacy will prevail. Global equities trade higher, with modest gains across regions as investors cautiously position for potential progress in US-Iran talks. Market focus remains squarely on geopolitical developments, particularly uncertainty around the ceasefire deadline and whether negotiations will proceed. At the same time, attention is turning to Fed nominee Kevin Warsh’s Senate hearing, with investors watching closely for signals on the policy outlook amid inflation risks tied to elevated energy prices. Elsewhere, oil prices weaken, while gold also slips amid a firmer dollar and shifting inflation expectations. Bitcoin remains broadly flat, reflecting subdued risk appetite and limited directional catalysts. Today's focus will be on US Retail Sales, Fed Chair-designate Warsh's confirmation hearing, and the 4-week average of ADP Employment Change, which helps drive intraday direction in the currency market.

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News Headlines. Kevin Warsh to say Fed independence not threatened by political pressure. US positive on Iran deal, but talks still uncertain as ceasefire end nears. Gulf worries US-Iran talks may cement Tehran's 'golden' grip on Hormuz. Japan opens door to global arms market. War in Iran is causing the biggest energy crisis in history, IEA says. Russia has taken 1,700 square km of Ukraine this year, the top general says. Bank of Canada announces appointment of two deputy governors. The Bank of Canada survey: firms' outlook was improving before the Iran war. Apple chief Tim Cook to hand over to John Ternus in September. Gaza reconstruction to cost more than $70bn, officials say. UnitedHealth tops quarterly estimates, hikes profit outlook as insurer manages higher medical costs.

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In currency markets. Currency markets slip slightly in early trading, with most G10 pairs edging lower against the USD as caution builds ahead of the US-Iran ceasefire deadline. Renewed geopolitical uncertainty and doubts over negotiations are prompting a defensive tone, keeping FX moves subdued and range-bound. The Japanese yen sees modest support on safe-haven demand, though gains remain limited amid concerns over Japan’s exposure to higher energy prices.

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In commodity markets. Oil & Silver prices weaken 1.3%. Natural Gas & Coffee prices retreat 0.8%. Copper prices slip 0.15%. Soybean prices gain 0.5%, and Wheat prices firmed 0.25%.

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CAD holds just off multi-week highs in early trading despite oil prices slipping, with the loonie supported by underlying risk sentiment. Monday’s inflation data showed a softer-than-expected rise to 2.4% YoY, suggesting price pressures are being driven largely by energy rather than broad-based demand. BoC commentary continues to downplay near-term inflation spikes, reinforcing expectations that policymakers will remain on hold despite ongoing geopolitical volatility. Focus now shifts to US retail sales and Fed nominee Warsh’s remarks for potential spillover effects on USD direction and the loonie.

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EURCAD slips in early trading as weaker Eurozone sentiment weighs on the euro, while the loonie remains relatively supported despite softer oil prices. Recent Canadian CPI data and a steady BoC stance continue to underpin the CAD.

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EUR remains under modest pressure but continues to find support around 1.1750, despite weaker German sentiment data weighing on the euro. The downside appears contained for now as broader market caution limits follow-through selling. Near-term direction will hinge on US retail sales and Fed nominee Warsh’s testimony, alongside ongoing US-Iran developments.

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GBPEUR trades sideways in early sessions, holding within a narrow range as stronger UK employment data lends support to the pound. However, gains remain limited as markets stay cautious and await Eurozone sentiment data and ECB commentary for further direction. Near-term moves are likely to remain range-bound, with geopolitical developments and central bank signals guiding the cross.

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GBP slips in early trading, finding support at the 1.3500 level following stronger-than-expected UK labour market data. The unexpected drop in unemployment is lending near-term support to the pound, though mixed underlying details suggest caution. Focus now shifts to US retail sales and Fed Warsh’s testimony, which could drive the next move in the pair.