The Morning Update

The USD firms, oil prices are steady, equity markets are up, and US yields rise as investors await Friday's Fed chair's speech. The US edges higher, while EUR and GBP hold near 13-month highs. Global equity markets strengthen and are on the brink of an all-time high as the Fed minutes add further support for a September rate cut. After the July jobs and inflation data releases, the Fed minutes showed several policymakers saw a case for cutting interest rates in July. Investors are focused on Fed Chair Powell's speech at Jackson Hole for further evidence of a September rate cut, with some market pundits raising expectations of a 100 bps of easing in 2024. Elsewhere, oil prices are steady, avoiding a fifth session of weakness as demand worries keep crude prices under pressure. Bitcoin eases in early trading but holds above $60k, while gold and silver prices are sidelined. In focus today, ECB Monetary Policy Meeting Accounts, US Initial Jobless Claims, S&P Global Composite, Manufacturing & Services PMI data releases to help provide intraday direction to currency markets.

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In other news. Canada's two major freight railroads come to a full stop as labor talks collapse. PWC braced for a Six-month ban on China over Evergrande audit. TD took a $.2.6 billion hit on the US probe and sold Schwab shares. Saudi Arabia's oil export sales have dropped to a three-year low. Due to the Ukraine incursion, the IAEA chief is to visit the Kursk nuclear plant. Deutsche Bank settles with 60% of claimants in over decade-long Postbank case. Harris's running mate Walz calls on voters to 'turn the page' on Trump. Germany's far-left disrupter claims credit for limiting aid to Ukraine. Eurozone business activity gets boosts from Olympics, PMI shows.

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In currency markets. The Euro and GBP hold on to gains and remain at 2024 highs, while CNY is near 8-month highs against the USD. In Asia, long positions on Indonesia's rupiah hit decade highs. CNY is flat, while Asian currencies slip 0.1% on average against the USD. Trading currencies are mixed, with ZAR tumbling 0.75%, JPY, SEK & NOK weakening 0.35%, MXN easing 0.2%, AUD down 0.1%, NZD flat, and CHF up 0.1% against the USD.

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In commodity markets. Oil and silver prices are up 0.15%, natural gas and gold prices slipped 0.15%, copper and soybean prices fell 0.5%, and wheat prices firmed by 0.25%.

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CAD extended gains, testing fresh four-month highs as expectations for a Fed rate cut increased following Wednesday's Fed Minutes. The news that Canada's two major freight railroads failed to reach an agreement could bring freight to a standstill, impacting a combined $1 billion in goods daily. The BoC has shifted its focus to boosting the economy; a prolonged railroad shutdown will have a negative impact on the Canadian domestic economy. Markets will be focused on the US jobs and PMI data today, but we expect the response to be muted, with investors preferring to stay on the sidelines ahead of Fed Chair Powell's speech on Friday.

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EURCAD remains up 1.25% month-to-date but eases intraday as investors take profits on euro gains ahead of Friday's Fed speech and new comments of an ECB rate cut in September.

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EUR finds resistance at 1.1150 on the eurozone PMI and wage growth data. Following mixed German and Eurozone PMI reports and the eurozone Negotiated Wage rates, the euro failed to breach 1.1150. Domestically, French PMI Composite and Services beat expectations and are directly related to the Paris Olympics. At the same time, German PMI data all fell below expectations, highlighting economic growth concerns. The negotiated wage rates are seen as a gauge of inflation, so the ECB will be interested in the significant increase in Q2, which is printed at 3.55% vs. -4.75%. Today, US PMI data will be monitored closely, but we expect the Euro to remain capped heading into the Fed Chair's Powell speech on Friday.

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GBPEUR strengthened in early trading, with increasing expectations of the BoE pausing interest rates in September. At the same time, the ECB is expected to cut domestic interest rates in September.

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GBP extends gains through 1.3100 amid a stalled USD and upbeat UK PMI results. The pound received a boost with the S&P Global/CIPS Composite and Manufacturing & Services PMI all beating expectations, providing strong support that the BoE will keep rates on hold. The pound is holding at a fresh 13-month high against the USD; a break of 1.3200 opens up the potential for a rally to 1.3700, last seen in 2022. Intraday US Jobs and PMI data will help provide intraday direction for the pound.