The Morning Update

The USD extended its losses, oil prices are steady, equity markets are mixed, and US yields eased ahead of key US jobs data. The USD weakened for a fourth day, and US yields traded lower into today's crucial US NFP report. Asian equity markets are down, while European equity markets extended gains to all-time highs as risk-on sentiment improves with increasing optimism that the US could lower interest rates as early as September. We have seen evidence of a cooling US economy with weaker Manufacturing & Service Sector PMI data, so investors will focus on today's NFP as a crucial signal for the Fed's next step on easing rates. NFP is expected to ease to 190k in June, down from 272k in May, with average hourly earnings increasing to 3.9%, its lowest level in three years, and Unemployment levels to hold at 4%. Elsewhere, oil prices are on track for a fourth straight week of gains, with Brent Crude hitting $87, its highest level since April. Bitcoin dropped to $54k, its lowest level since February, as part of a broader crypto selloff. In focus today, US Average Earnings, Nonfarm Payroll, Unemployment Rate, Fed Monetary Policy Report, CAD Net Change in Employment, Unemployment Rate, and Average Hourly Wages will help provide intraday direction to currency markets.

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In other news. Starmer hails historic Labour victory as Conservatives sink to worst-ever result (FT). The US sees 'significant opening' for Israel-Hamas hostage deal. Hungary's PM Orban is to meet Putin after the Kyiv trip. Kenya's mass protests expose African fury with the IMF. The ECB minutes reveal doubts over rate cuts. China will reveal the next steps in the EU brandy probe as EV tariffs take effect. Struggling Biden faces big test with ABC interview, vows to fight on (Reuters). Mexico issues 'red alert' as Hurricane Beryl hurtles toward coast. Greater Toronto home sales fell 16% in June. Hudson's Bay Co. is buying Neiman Marcus for US$ 2.65 billion.

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In currency markets. The USD continues to slip ahead of the US Jobs data, a significant event that could have a profound impact on the market. The GBP extended gains after the Labour landslide in the UK Election, and the JPY strengthened off 1986 lows. CNY is flat, while Asian currencies strengthen 0.2% on average against the USD. Trading currencies extend gains, with MXN flat, NOK, SEK, NZD & AUD up 0.1%, CHF firms by 0.2%, JPY strengthening by 0.35%, and ZAR rallied by 0.55% against the USD.

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In commodity markets. Oil, Silver, Wheat, Gold, and Soybean prices are flat. Natural Gas prices tumbled by 2.85%, and Copper prices rallied by 2.4%.

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CAD extends gains towards 10-week highs on the back of a weakening USD with increasing speculation that the Fed could cut interest rates as early as September. The Loonie is also finding support from strengthening oil prices, which have rallied for a fourth week of gains amid Mid-East concerns and lower US stockpile heading into the summer driving season. Domestically, the focus will be on net change in employment, which is expected to drop to 22.5%, and the unemployment rate to increase to 6.3%. The potential of weakening employment levels could increase the prospect of another BoC interest rate cut at its next meeting at the end of July. The NFP will be a primary market driver out of the US today.

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EURCAD edged to its highest level in July with the prospect of weaker employment levels, which could put pressure on the loonie. Meanwhile, the ECB minutes took a more hawkish view on short-term eurozone interest rates.

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EUR strengthens through 1.0800 ahead of the US payrolls report. Euro extends amid broad USD weakness and improving risk sentiment with the prospect of a Fed rate cut in Q3. Domestically, Eurozone retail sales y/y beat expectations at 0.3%, Italian Retail sales also came in solid y/y at 0.4%, and German Industrial production came in weaker -6.7% May y/y, falling from -3.9% in April. The Euro is finding support from the ECB minutes, which saw policymakers express doubts about cutting interest rates in June because inflation and wages were heading in the opposite direction. The focus will be on the NFP; if we see stronger-than-expected job growth, we could quickly see the Euro give up its weekly gains.

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GBPEUR edges higher following the landslide victory by the Labour Party in the UK, while investors remain cautious ahead of France's runoff election vote on Sunday.

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GBP extends gains towards 1.2800 after Labour takes power following a landslide victory. The pound is benefiting from USD falling to a nearly three-week low and the significant Labour victory. The Labour Party won a parliamentary majority, securing 411 of the 650 seats in the House of Commons, and as this outcome was largely expected, it was priced into the markets. The weakening USD suggests that the market area is already pricing in a weaker NFP reading, which increases expectations for a Federal Reserve rate cut in September. According to the CME FedWatch Tool, there is still a 25% probability that the Fed will leave the policy rate unchanged in September.