The Morning Update

The USD edges higher, oil prices advance, equity markets are down, and U.S. yields rise as risk sentiment wanes. The U.S. dollar remains supported by elevated Treasury yields and Fed Chair Kevin Warsh’s hawkish Jackson Hole message, which has strengthened expectations for further tightening, with attention now turning to this week’s U.S. labour-market data and Friday’s nonfarm payrolls report. Global equity markets are lower as renewed U.S.-Iran tensions push oil prices higher, adding to inflation concerns and reinforcing the cautious tone across financial markets. Elsewhere, oil prices extend their rally as renewed U.S.-Iran tensions heighten concerns over Middle East supply disruptions, while gold and Bitcoin prices weaken as rising bond yields and expectations for further Fed tightening weigh on both assets. Today’s economic calendar includes Eurozone preliminary CPI inflation, Canadian S&P Global Manufacturing PMI, U.S. JOLTS Job Openings, final S&P Global Manufacturing PMI and ISM Manufacturing PMI.

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News Headlines. Global bond yields soar to multi-decade highs as Middle East turmoil reignites inflation fears. Indian Prime Minister Modi asks Putin to end the Ukraine war amid US tariff threat on Russian oil. Shein shares slide as much as 10% in Hong Kong debut. Europeans shun Russian finance minister at US-hosted G20. 'Conflict of attrition' in Iran could keep inflation high, ECB policymaker warns. The US Army secretary resigns after tensions with Pete Hegseth. America 'not at war' with Canada, insists US Treasury Secretary Scott Bessent. TD sees Canada investment 'super-cycle' with Tax, and regulation reforms.

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In currency markets. Against the USD, currencies are mixed, with the Japanese yen remaining under pressure near the key 160 level despite Japan’s 10-year government bond yield hitting 3% for the first time since 1996. Rising Japanese yields reflect mounting inflation, fiscal concerns, and growing expectations for faster BoJ tightening, but the yen remains weighed down by the still-wide U.S.-Japan rate differential, keeping intervention risk firmly in focus.

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In commodity markets. WTI +2.47% | Nat Gas -0.55% | Gold -1.34% | Silver -2.66% | Copper -1.25% | Palladium -2.60% | Coffee -0.82% | Cocoa -1.55% | Soybeans +0.99% | Wheat +1.23%

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CAD holds steady in early trading despite rallying oil prices, with ongoing Canada-U.S. trade tensions and elevated U.S. yields limiting support for the currency. Yesterday’s rebound from a two-week low was helped by stronger crude and month-end hedging flows, although markets remain cautious over the potential economic impact of recently imposed U.S. tariffs. In focus today is Canada’s S&P Global Manufacturing PMI alongside key U.S. data releases, ahead of tomorrow’s BoC decision, where rates are widely expected to remain unchanged at 2.25%.

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EURCAD eases below 1.6100 in early trading as the euro remains subdued, while stronger oil prices provide some support for CAD. Focus today turns to Canada’s Manufacturing PMI, with caution likely ahead of Wednesday’s BoC interest-rate decision, where policymakers are widely expected to leave rates unchanged at 2.25% as they assess resilient domestic growth against the risks from escalating U.S.-Canada trade tensions.

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EUR slips below 1.1600 after disappointing German retail sales fell 3.4% in July, their sharpest decline in more than four years. Attention now turns to today’s preliminary Eurozone inflation data, where a stronger reading would reinforce expectations for further ECB tightening, although rising oil prices and concerns over their impact on Eurozone growth are limiting support for the single currency.

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GBPEUR edges higher as the euro comes under pressure after disappointing German retail sales fell 3.4% in July. The pound continues to benefit from its current interest-rate advantage, although expectations for ECB tightening and a more cautious BoE suggest the policy-rate gap could narrow later in 2026.

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GBP eases below 1.3550 as the U.S. dollar remains supported by Fed Chair Kevin Warsh’s hawkish Jackson Hole message and rising expectations for a September rate hike. The downside remains relatively contained as expectations for BoE tightening have also strengthened, with markets assigning around a 60% probability of a September hike and pricing in roughly 36bp of tightening by year-end.

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