The Morning Update

The USD is steady, oil prices weaken, equity markets are up, and US yields rise amid improving risk sentiment. The USD struggles to rebound, while the pound and euro edge back towards multi-month highs, helped by easing oil prices. Equity markets cautiously make gains ahead of Nvidia's report on Wednesday, following disappointing earnings from other "Magnificent Seven" mega caps. Alongside Nvidia's reporting, investors will be monitoring US economic and inflation data out late in the week, while evidence of a slowdown in China weighs on investor sentiment. Elsewhere, oil prices have weakened after surging during the last few trading sessions due to Libyan outages and Mideast risk. Fed's Daly said it's appropriate to begin cutting rates, while Fed's Barkin said he still saw upside risks for inflation, though he supports "dialing down' rates. Bitcoin, gold, and silver weakened in early trading while copper prices increased. Today, we see a light economic calendar with the US Housing Price Index and Consumer Confidence in focus to help guide the direction of markets.

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In other news, Canada imposes a 100% tariff on imports of Chinese-made electric vehicles, matching the US. Zelenskyy urges the West to lift curbs on Ukraine's weapons use in Russia. Chinese retailer PDD took a $ 55 billion share hit after warning of an 'inevitable' profit decline. As Pacific Island leaders meet, alarms are raised about rising sea levels and ocean warming. Japan says China's airspace incursion is 'totally unacceptable.' Edgar Bronfman drops Paramount bid, clearing the path for Skydance deal. UK PM Keir Starmer warns that the autumn budget will be 'painful.' Miners lift European shares as copper prices surge, and Nvidia results are in focus. Russia pounds Ukraine with missiles and drones for a second day in a row.

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In currency markets. It is a quiet start for currency markets today, with the USD holding steady, the pound and euro edging higher, while CNY and JPY ease ahead of Thursday's US GDP and Friday's key US inflation report. CNY slips by 0.1%, while Asian currencies are flat on average against the USD. Trading currencies are mixed with JPY & ZAR down 0.25%, MXN slipping 0.1%, CHF & NOK gaining by 0.1%, AUD & SEK up 0.2%, and NZD firmed by 0.35% against the USD.

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In commodity markets. Oil & wheat prices eased by 0.8%, natural gas prices tumbled by 2%, gold & silver prices weakened by 0.4%, copper prices firmed by 0.2%, and soybean prices fell by 0.3%.

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CAD holds onto fresh five-month highs, finding support for a weakening USD based on expectations of a Fed Rate cut in September and the unwinding of short positions on the  US CFTC. We anticipate the loonie, alongside its peers, will steady with easing oil prices and investors stepping to the sidelines ahead of Thursday's US growth data and Friday's US Inflation and CAD's growth data to give both central banks guidance for their September interest rate decisions. Intraday, we expect the loonie to be capped near 1.3450.

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EURCAD steadies below 1.5050, with weakening oil and precious metal prices dampening the CAD's recent gains.

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EUR fails 1.1200 as markets ready for key US data at the end of the week. The euro consolidates above 1.1150 amid a struggling USD with the absence of high-tier economic data, Mideast uncertainty, and the prospect of a Fed rate cut in September. Domestically, the ECB accounts published last week revealed that policymakers saw no immediate need to lower interest rates last month and cautioned that the issue might be revisited in September, given the ongoing impact of high interest rates on the economy. Intraday, we look for the markets to steady with the lack of high-tier US data releases.

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GBPEUR extends gains, recouping its August losses. The pound tumbled from 1.1850 to 1.1600 in early August and then rebounded towards 1.1850 in August following increasing BoE pausing interest policy expectations.

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GBP extends to fresh monthly highs, breaching 1.3200 amid a softer USD and improving risk sentiment. The pound continues to recover from August lows as easing Middle East concerns stall the USD's recovery as investors unwind safe-haven trades. Domestically, PM Stamer warns that the October budget will be "painful" and asks the country to "accept short-term pain for the long-term good." Investors continue to support the pound with increasing expectations of a Fed easing in September, while the BoE is expected to keep its policy on hold. Intraday, we anticipate the pound will hold within its current trading range with the lack of market-driving economic data releases today.