The Morning Update

The USD holds steady, oil extends its retreat, equity markets are mixed, and US yields rise ahead of the key US inflation report. The USD holds broadly steady near recent multi-month lows as investors remain reluctant to take fresh positions ahead of today’s key U.S. PCE inflation report. Core PCE is expected at 0.2% m/m and 3.3% y/y, with the release likely to shape September Fed expectations, while attention will then shift to Fed Chair Kevin Warsh’s Jackson Hole speech on Friday. Global equity markets are mixed, with investors reluctant to take significant positions ahead of today’s U.S. PCE inflation report and Nvidia earnings. European equities edge higher while U.S. futures are subdued, as softer oil prices provide some relief from recent inflation concerns but elevated bond yields continue to temper risk appetite. Elsewhere, oil prices continue to tumble as renewed Iran-Oman talks raise hopes of restoring shipping through the Strait of Hormuz, with WTI down almost 7% over the past five sessions. Gold eases slightly from recent highs, while Bitcoin also trades modestly lower as investors remain cautious ahead of today’s U.S. inflation data. In focus today: Markets will be watching U.S. Core PCE inflation, the Fed’s preferred inflation gauge, alongside the second estimate of Q2 GDP and durable goods orders, with the releases expected to provide fresh direction for currency markets.

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News Headlines. Canada unveils retaliatory tariffs on about $20 billion of goods. Iran and Oman prepare Hormuz deal as the US holds back on secondary sanctions. Treasury yields little changed ahead of key inflation data. SpaceX plans to build a $100 billion spaceport in Louisiana. Bessent's bond intervention puts the US Treasury on a collision course with the Fed. Bill Gates calls for 'human reserved' jobs to protect the labour force from AI. Trump administration pauses immigrant visa applications. Liquidators can pursue PwC globally over Chinese property giant's collapse, court rules. Insurers pile into deals that let banks offload default risk.

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In currency markets. Against the USD, G10 currencies are mixed in subdued trading ahead of today’s key U.S. inflation data. SEK and NZD are the weaker performers, with the kiwi pressured by its relatively soft domestic rate outlook, while the krona is giving back some of its recent gains amid cautious positioning and softer European sentiment.

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In commodity markets. WTI -2.72% | Nat Gas +1.55% | Gold -0.42% | Silver -0.21% | Copper -0.05% | Palladium +0.63% | Coffee -1.46% | Cocoa +0.84% | Soybeans +0.24% | Wheat +1.71%

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CAD comes under renewed pressure, weakening through 1.3850 as escalating Canada-U.S. trade tensions and sharply lower oil prices weigh on the loonie. Canada’s retaliatory tariffs on roughly $20 billion of U.S. goods add further uncertainty to the growth and inflation outlook, complicating the BoC’s policy path, although markets continue to see its next move as a rate hike.

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EURCAD firms in early trading as renewed pressure on the Canadian dollar from weaker oil prices and escalating Canada-U.S. trade tensions outweighs the euro’s modest pullback. The euro remains underpinned by expectations for further ECB tightening, leaving the near-term bias tilted toward further EURCAD strength.

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EUR continues to find support above 1.1650 but edges modestly lower as markets remain cautious ahead of today’s key U.S. PCE inflation report. The euro remains underpinned by diverging rate expectations, with the Fed expected to hold rates in September while the ECB is increasingly seen raising rates as it responds to inflation risks stemming from the Iran conflict.

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GBPEUR eases slightly in early trading, with the euro drawing support from stronger German economic data while GBP consolidates near recent highs. Overall moves remain limited, with both currencies relatively well supported and markets cautious ahead of today’s key U.S. inflation data.

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GBP eases below 1.3650 as investors remain cautious ahead of today’s key U.S. PCE inflation report. The downside remains limited, however, with resilient UK economic data maintaining expectations for at least one BoE rate hike later this year.