The Morning Update

The USD holds steady, oil prices weaken, equity markets are, and US yields are mixed as investors shrug off the US sanctions plans. The USD is broadly unchanged in early trading as investors largely shrug off Washington’s expanded sanctions against Iran, which stopped short of immediately imposing the most disruptive secondary measures. Currency markets remain cautious ahead of Wednesday’s key U.S. PCE inflation report, with Fed Chair Kevin Warsh’s Jackson Hole speech on Friday providing the next major test for the U.S. rate outlook. Global equity markets are higher, supported by a rebound in technology shares and declining bond yields as oil prices retreat below $90. Nvidia is leading the recovery ahead of Wednesday’s closely watched earnings, while easing Middle East concerns following reports that U.S. diplomats could return to regional embassies are providing additional support to risk sentiment. Elsewhere, oil prices weaken as the latest U.S. sanctions on Iran proved less disruptive to near-term supply than feared, while gold holds broadly steady near recent highs. Bitcoin firms above $80,000 as concerns over U.S. debt and the Treasury’s expanded bond-buyback program continue to support demand for dollar alternatives. In focus today: Markets will watch the U.S. ADP Employment Change four-week average, Consumer Confidence, New Home Sales, and the Richmond Fed Manufacturing Index, with the releases expected to provide fresh direction for currency markets.

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News Headlines. China warns the US it could retaliate over Iran sanctions. US grain farmers pummelled as Iran war triggers surge in costs. The US Supreme Court allows Trump restrictions on mail-in ballots. Shein's up to $1.8 billion Hong Kong IPO order book covered. Six months into the Iran war, almost half of global oil flows from war zones. Iran vows to retaliate after the US widens sanctions. Canada to unveil Trump response, including loans and benefits. Trump laments the lack of US aluminum amid trade row with Canada. Bessent's Iran threat hinges on the US willingness to hit China. Jackson Hole offers Warsh a high-profile slot to rebut his critics.

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In currency markets. Against the USD, currency markets are relatively stable in early trading, with most G10 currencies confined to narrow ranges as investors await tomorrow’s key U.S. inflation data. Petro-currencies are among the weaker performers as falling oil prices weigh on sentiment, with the NOK underperforming.

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In commodity markets. WTI -2.94% | Nat Gas -1.47% | Gold -0.11% | Silver -1.08% | Copper +0.42% | Palladium -2.59% | Coffee -1.07% | Cocoa -1.67% | Soybeans -0.49% | Wheat -1.22%

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CAD slips in early trading, extending Monday's losses as escalating US-Canada trade tensions and the introduction of 50% US tariffs continue to weigh on sentiment. A further 50% tariff on Canadian autos, parts and steel planned for January adds to uncertainty, while weaker oil prices provide an additional headwind, leaving CAD vulnerable to further short-term pressure despite recent signs of resilience in the domestic economy. With USD/CAD pushing back toward 1.39, the combination of trade uncertainty, softer crude prices and renewed US dollar demand leaves the bias toward a weaker loonie in the near term.

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EURCAD edges higher as stronger German data supports the euro, while weaker oil prices and ongoing Canada-U.S. trade tensions weigh on the loonie. The near-term bias remains toward further EURCAD strength.

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EUR holds steady above 1.1650, supported by stronger German economic data, with Q2 GDP revised higher and business confidence reaching a one-year high. The euro remains close to recent three-month highs, although caution ahead of tomorrow’s key U.S. PCE inflation report is keeping trading relatively subdued.

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GBPEUR holds steady around 1.1690, with stronger German GDP and IFO data providing some support for the euro, while sterling continues to benefit from relatively attractive UK yields and recent resilient business activity. With little fresh UK data today, the cross remains confined to a narrow range.

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GBP stalls below 1.3650 but remains close to six-month highs, supported by resilient UK data and expectations for further BoE tightening. With little on the domestic calendar, attention turns to tomorrow’s key U.S. PCE inflation report and Fed Chair Kevin Warsh’s Jackson Hole speech on Friday.