The Morning Update

The USD edges higher, oil prices are steady, equity markets are up, and US yields rise on cautious optimism. Currency markets are steady, and oil prices hold near 3-month highs while equity markets strengthened in early trading on China's support pledge, but investors remain cautious ahead of central bank rate decisions and the ongoing corporate earnings this week. China's Politburo on Monday said it is necessary to adapt to significant changes in market supply & demand and optimize property policies in a timely manner. In the US investors continue to price in a better outlook for companies making industrial equipment & heavy machinery helping the Dow Index extend its longest winning streak in 6 years. Today investors will focus on GM & key tech company earnings, US Housing Price Index & Consumer Confidence, but we expect markets to remain cautious ahead of Wednesday's Federal Reserve interest rate decision.

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In other news. GM earnings released early via a Chinese website see FY net $ 9.3B-$10.7B, "putting profits ahead of growth" saw its shares gain 2% in early trading. China's property firms rally after Beijing pledges economic support. Anti-Netanyahu protests mount after Israel passes judicial bill. Russia attacks Kyiv with new air strikes, but no casualties were reported. Greek PM warns of difficult days ahead as wildfires continue to rage. Unilever quarterly sales beat estimates, boosting shares. in Canada PM Trudeau to shuffle cabinet as inflation and housing woes take their toll. The UK is to run the highest debt interest bill in the developed world.

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In currency markets. Chinese Yuan rallies as Beijing vows to boost its economy. Argentina's Peso extends losses, setting fresh record lows vs USD as part of the anticipated IMF deal. Commodity currencies improve on China's stimulus news. Russian Rouble gains to fresh 1-week highs vs USD. Euro weakens of disappointing data. CNY gains 0.6%, while Asian currencies are up 0.2% on average vs USD. Trading currencies are mixed with NOK weakening 0.25%, while MXN, CHF, JPY & NZD are flat, SEK is up 0.15%, AUD gains 0.4%, and ZAR strengthening 0.55% vs USD.

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Oil prices hold steady near 3-month highs finding support from China stimulus news and ongoing output cuts from OPEC+. CAD consolidates below 1.3200 on a combination of higher commodity prices and the BoC survey showing that investors were more optimistic about the economic outlook. We anticipate the loonie strength will be capped with investors sidelined heading into Wednesday's Federal Reserve interest rate decision. Intraday we expect CAD to hold within 1.3135-1.3235 until the Fed rate decision.

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EURCAD continues to slip as disappointing data out of the Eurozone suggests that the ECB will be limited to a 25bps rate hike.

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EUR heads into its 5th down day taking the Euro through 1.1050 after further disappointing Eurozone data. In Europe a bank lending survey today showed a record plunge in loan demand from Eurozone companies, this coupled with a dismal business outlook from Germany suggests the ECB won't hike beyond 25bps on Thursday. Euro extended its losses to its lowest level in two weeks after the IFO institute's monthly survey showed that the business climate index in Germany declined further than expected to 87.3 in July. Growing concerns about shrinking Q3 growth across the Eurozone, and increasing recession fears will put pressure on Thursday's ECB rate decision. We expect markets to be sidelined ahead of Wednesday's Fed interest rate decision.

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GBPEUR gains in early trading on the back of the weakening Euro after disappointing domestic data.

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GBP steadies around 1.2850 in early trading ahead of US data. The pound is holding steady at 1.2850 after giving up early gains from China stimulus support helped the bound break its 7-day losing streak. Investors remain sidelined heading into today's US data releases and Wednesday's key Federal Reserve interest rate decision.

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