The Morning Update

The USD remains steady, oil prices decline, equity markets are mixed, and US yields increase, driven by inflation anxiety and mounting government debt. The USD is retreating from monthly highs as investors turn their attention to today’s JOLTS data and the Fed’s Beige Book, with Friday’s critical August Nonfarm Payrolls report expected to offer key guidance for the Fed’s September 17 rate decision. Asian equities continue under pressure, while European equities rose after their steepest loss in a month on Tuesday. Nasdaq 100 futures advanced as Alphabet rallied in extended trading on Tuesday, buoyed by a ruling that Google won't be forced to sell its Chrome browser. Elsewhere, oil prices dip, but hold near a one-month high on US sanctions. Gold set fresh record highs on US rate-cut bets and ongoing trade turmoil, lifting demand. "I don't see this movement as a threat to the rising trend of stock markets," said Roland Kaloyan, at Societe Generale SA. "We don't see yields rising much further than their current levels. That being said, this bond selloff means that there will be another greater focus on Friday's US job data and their impact on the Fed's easing policy." In focus today: CAD Labour Productivity, US Factory Orders, JOLTS Jobs Openings, Fed's Beige Book, and Fed's Musalem and Kashkari speeches will help the direction of currency markets.

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In the news. Xi's 'unstoppable' China at landmark military parade with Putin and Kim. Global bond sell-off deepens as 30-year yield hits 5%. Eurozone inflation rises to 2.1% in August. French Finance Minister urges compromise on 2026 budget. Alphabet stock pops 6% in premarket trading after Google avoids break-up in antitrust case. The UK has weeks to solve fiscal puzzle as it sets date for its Autumn Budget. Hyundai Motor Union launches strikes in South Korea over wages and working hours. Eurozone economic growth in August, according to the PMI. Lufthansa faces a possible pilot strike after pensions talk fail. Canadian units deemed combat ineffective in recent training exercise. Police launch investigation into iPro realty scandal. Global bond selloff deepens with longer debt leading losses.

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In currency markets. The pound and yen rebound from Tuesday's sell-off, while the USD Index steadies as investors look towards the US JOLTS Jobs Opening ahead of Friday's critical US jobs report. CNY slips 0.1%, while the Asian currencies on average are up 0.1% against the USD. Trading currencies rebound, with KWD & NZD flat, JPY, MXN, and NOK up 0.1%, AUD, CHF, SEK, and DKK firmed 0.2%, ZAR, PLN & CZK strengthened by 0.4% against the USD.

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In commodity markets. Oil prices tumbled by 1.8%. Natural Gas prices declined by 0.6%. Gold prices firmed by 0.3%. Silver, Copper, Wheat and Soybean prices are flat.

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CAD remains under pressure against the USD, reaching its weakest level in six days as investors consider the likelihood of a Bank of Canada rate cut this month. Market expectations now assign a 50% probability of easing at the September 17 meeting, up from 40% following weaker-than-expected Q2 growth data. Rising global bond yields, especially in the U.S., UK, and Europe, have increased unease and supported the U.S. Intraday, focus will be on the US jobs report and the Fed's Beige book to provide direction ahead of Friday's key Canadian Jobs report and the Ivey PMI report.

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EUR/CAD is holding below 1.6100 as investors weigh a modest rise in Eurozone inflation alongside the ECB’s steady policy stance and growing speculation of a Bank of Canada rate cut after weak domestic growth.

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EUR edges higher in early trading, retesting 1.1650, supported by milder US dollar pressure amid improved risk sentiment and firmer Eurozone data. Inflation ticked up to 2.1% in August, and the composite PMI hit a one-year high at 51.0, signalling moderate growth momentum. Meanwhile, markets expect the ECB to maintain its current 2% rate through 2025, with only a remote possibility of a modest policy easing in early 2026 if needed. We expect investors to stay cautious ahead of the US jobs report, and if we see a print outside of expectations, there could be an increase in volatility.

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GBP/EUR is likely to remain pressured today, reflecting continued investor angst over UK fiscal stability and elevated gilt yields. The euro finds some footing, underpinned by the ECB’s steady policy messaging.

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GBP is finding some relief after recent heavy losses, supported by conciliatory remarks from UK Finance Minister Rachel Reeves pledging a “tight grip” on public finances and confirming the autumn Budget for November 26. Her emphasis on fiscal discipline has helped ease investor concerns amid soaring gilt yields and fears over the UK’s debt trajectory. While these reassurances provide short-term support, sterling’s broader outlook remains vulnerable to fiscal credibility risks and global dollar dynamics.

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