The Morning Update

The USD remains flat, oil prices are firm, equity markets are mixed, and US yields rise as investors watch US tariff developments. The USD advanced against its peers on Tuesday and held firm in early trading after the latest US threats of tariffs, which are now due to start on August 1st. However, President Trump later said he was open to extensions if countries made proposals. Global equities are mixed as investors assess the potential impact of the latest US tariffs, with President Trump threatening more charges on copper and pharmaceuticals. US futures are steady, while European equities gained, testing monthly highs, and Asian equities slumped due to tariff concerns. The LME copper slid almost 2.5%, after surging 13% on Tuesday. "The market has already overreacted in the past on Trump's trade announcements, so I think investors are being prudent and cautious," said Stephane Deo at Eleva Capital in Paris. "That being said, tariffs will end up being much higher in the fall than they were at the beginning of the year, so that's likely to fuel inflation." Elsewhere, oil prices steadied as industry reports point to gains in US stockpiles. Bitcoin slips to $ 108,700, gold weakens to $3,297 per ounce, and silver prices edge higher. Markets will be focused on the FOMC Minutes and speeches from ECB's Lane, De Guindos and Nagel to help provide intraday direction.

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In other news. Trump says he'll impose a 50% tariff on copper and wait a year on levies on drugs. China's factory-gate deflation is at its worst in two years as the trade war bites. Macron urges Britain and France to move on from Brexit and work 'side by side.' US buyers of critical minerals bypass China's export ban. Stock futures are little changed as investors monitor Trump tariff developments. Shares of Ray-Ban maker EssilorLuxottica jump 6% on reported Meta stake in AI push. Amazon faces scrutiny as Canada's competition watchdog deepens probe. Trump plans to impose a steep copper tariff, which could be a potential blow to Canadian exporters of the metal. Nissan has halted production of three models for Canada at two US plants.

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In currency markets. The USD is near three-week highs against the Yen as the US/Japan trade war intensifies. The NZD holds steady after the Reserve Bank kept interest rates on hold, and the INR remains under pressure from US tariffs. CNY eased 0.1%, while Asian currencies are flat on average against the USD. Trading currencies are holding a tight range, with ZAR weakening 0.3%, DKK & CZK down 0.1%, KWD, SEK, NOK, and CHF flat. AUD & NZD firming 0.15%. JPY& MXN are gaining 0.2% against the USD.

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In commodity markets. Oil and Wheat prices firmed 0.4%. Natural Gas prices weakened by 2.3%. Gold prices fell 0.5%. Silver & Wheat prices up 0.15% and Copper prices tumbled 2.75%.

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CAD continues to ease against the USD, touching its weakest levels since June 30th as continuing US tariff pressures keep investor risk appetites in check. Tuesday saw the Ivey PMI strengthen to its highest level since February to 53.5, surpassing the forecasted 49.1. Canada has already been hit with US tariffs on autos, steel, and aluminum, with the prospect of a 50% tariff on copper, which could add additional pressure on Carney to secure a trade deal by July 21st. Intraday, the US FOMC minutes will help provide direction to the loonie.

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EURCAD holds steady intraday, but the CAD remains on the back foot against the EUR as Canada faces a greater threat of escalating US commodity tariffs. In perspective, the 52-week range has spanned from a low of 1.4487 to a high of 1.6110, with the prospect of still further euro strengthening.

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EUR bounces off fresh July as focus shifts to ECB comments on the FOMC minutes. The euro remains on the back foot against the USD, hitting its weakest level in two weeks as investors favour the USD amid intense EU/US trade negotiations. President Trump said that the EU has been 'very nice to us' in trade talks, and the decision on tariffs is close, as it happens. Intraday, investors will be monitoring a flurry of ECB speakers and the US FOMC Minutes to help provide direction.

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GBPEUR firms in early trading as ongoing EU-US trade uncertainties continue to put pressure on the euro. Economists are forecasting the pound to weaken to 1.1527, and then extend its downward trend to 1.1468 in six months.

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GBP holds steady below 1.3600 against the USD in early trading. The pound holds steady as the US prepare new tariff announcements ahead of its fresh August 1st deadlines. The UK was the first country to secure a trade deal with the US, which is helping to shield the pound from the ongoing tariff volatility. Domestically, the pound's biggest threat will be the next steps for the Chancellor Reeves, and how she will manage the expected GBP 4.8 billion burden for fiscal 2029-30. Intraday, we expect the pound to remain subdued ahead of the release of the FOMC minutes.