The Morning Update

The USD extends gains, oil prices ease, while global equity markets and US yields are mixed amid rate fears and Middle East supply concerns. The U.S. dollar continues to edge higher, supported by elevated Treasury yields, firm oil prices and growing expectations for further Federal Reserve tightening. Attention now turns to this week’s U.S. labour-market and inflation data for confirmation that the economy can withstand tighter policy. Global equity markets are mixed as investors remained cautious ahead of today’s U.S. job openings data and a heavy run of Fed speakers, with S&P 500 futures little changed and the 10-year Treasury yield holding near a 19-year high. Attention also remains on AI-related stocks and whether elevated borrowing costs begin to weigh more heavily on valuations and corporate investment. Elsewhere, oil prices eased intraday but remained elevated amid ongoing Middle East supply concerns, while bitcoin and gold rebounded after recent weakness. Today’s economic calendar includes Canadian GDP, U.S. JOLTS Job Openings and Consumer Confidence, alongside speeches from a flurry of Fed & ECB policy makers.

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News Headlines. Smart ring maker Oura postpones IPO due to market 'uncertainty'. US and Iran hold separate mediator talks as Middle East oil exports hit war-time highs. Putin orders army expansion as Zelensky warns Russia preparing to deploy 10,000 North Korean troops. SpaceX launches its massive starship rocket into orbit for the first time. 'We're fed up'; Falkland Islanders bristle at Milei's oil threat. Anthropic warns of 'existential risks to humanity' in IPO prospectus. Shell-led LNG Canada green lights, phase 2 expansion, doubling export capacity. Cleveland-Cliffs to idle output at Canada steel plant, blames tariffs, says CBC.

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In currency markets. Against the USD, AUD strengthened after the RBA raised rates to a 15-year high as persistent inflation kept policy firmly restrictive, while JPY remained supported by intervention concerns and expectations for further BoJ tightening. NOK, however, weakened despite elevated oil prices, as global interest-rate expectations have risen faster than in Norway, compressing the krone’s relative rate advantage; Norges Bank itself noted last week that foreign market rates have increased more sharply than Norwegian rates, which can weigh on NOK. Spanish inflation also accelerated further above the ECB’s 2% target, reinforcing expectations for additional euro-area tightening and adding to the relative pressure on NOK versus European currencies.

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In commodity markets. WTI -0.30% | Nat Gas -0.84% | Gold +0.29% | Silver -0.94% | Copper -0.35% | Palladium +0.70% | Coffee -0.54% | Cocoa +0.89% | Soybeans Flat | Wheat -0.83%

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CAD continues under pressure near two-and-a-half-month lows as safe-haven demand for the U.S. dollar, elevated Treasury yields and ongoing Middle East uncertainty weigh on the loonie. Attention now turns to today’s July GDP report, where economists expect growth to be flat after a 0.3% increase in June; a weak reading would reinforce concerns about domestic momentum and could temper expectations for near-term BoC tightening. The TSX is also expected to open cautiously after closing at its lowest level in nearly two months, with weakness in materials and financials offset partly by support from elevated oil prices.

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EURCAD slipped in early trading as the loonie recovered modestly, while weaker Eurozone sentiment limited support for the euro. The Eurozone Economic Sentiment Indicator fell to 97.9 in September from 98.4, missing expectations for an improvement, with softer consumer confidence offsetting firmer business sentiment. Attention now turns to today’s Canadian July GDP release, where economists expect growth to be flat after a 0.3% increase in June, while ECB speakers including Lagarde, Cipollone and Lane remain in focus for further guidance on the rate outlook.

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EUR remains under pressure near yearly lows as strong U.S. data, elevated Treasury yields and expectations for further Fed tightening continue to favour the dollar. Mixed Eurozone sentiment data offered little support, while ECB speakers remain in focus after Kazimir said September’s rate hike was unavoidable but called for greater flexibility in the months ahead. Attention now turns to tomorrow’s U.S. Core PCE inflation report, the Fed’s preferred inflation gauge, for further direction on the rate outlook.

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GBPEUR held relatively stable as hawkish Bank of England commentary offset lingering support for the euro from expectations of further ECB tightening. Ramsden’s warning that rising inflation risks could justify higher UK rates has helped underpin GBP, while the euro remains constrained by softer sentiment data and broader growth concerns. With both central banks still facing inflation pressure and markets already pricing additional tightening, neither currency has established a clear relative advantage.

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‍GBP remained under pressure against the U.S. dollar, trading close to three-month lows as elevated U.S. bond yields and firm oil prices continued to support the greenback. Recent BoE commentary has turned more hawkish, with Bailey and Ramsden warning that persistently high energy and broader inflation pressures could make it harder to keep rates unchanged and may ultimately justify further tightening. Attention today turns to U.S. labour-market data, with traders also cautious ahead of Wednesday’s Core PCE inflation report, while Prime Minister Burnham’s conference speech will be watched for signals on the UK fiscal outlook.

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