The USD holds steady, oil prices weaken, equity markets are down, and US yields ease as risk sentiment wanes. The USD edges off 5-week lows on rising odds for the re-election of former US President Trump. The Euro holds steady heading into Thursday's ECB interest rate decision, with expectations the central bank will keep rates on hold. European equity markets are down on disappointing corporate earnings. Asian equity markets came under pressure after Trump's VP selection, JD Vance, triggered further trade and geopolitical concerns following his comments to Fox News that China is the biggest threat to the US. In the US, markets are focused on Morgan Stanley and BoA earnings, following Goldman Sachs' strong earnings. Today, investors will monitor the US Retail Sales data for insight on the Fed's September meeting. On Monday, the Fed Chair said that inflation is heading toward the central bank's 2% goal. Elsewhere, oil prices eased on China demand concerns; Bitcoin eased, while gold & silver prices improved. In focus today, the CAD Inflation report, US Retail Sales, and Fed Kugler's speech will help drive direction to currency markets.
In other news. Trump picks Ohio senator Vance as 2024 running mate. Eurozone loan demand from households has risen for the first time since 2022. Luxury brands roll out 50% discounts as Chinese shoppers rein in spending. Turkey gets set to unveil a corporate tax overhaul. Powell says US data offers confidence that inflation is on the path to 2%. Clevland-cliffs CEO is confident of Ottawa's approval of the proposed Stelco acquisition. The downbeat Bank of Canada business and consumer surveys raise the odds of a second rate cut. China poses 'deadly' threat to UK, says former NATO boss.UnitedHealth beats quarterly profit estimates.
In currency markets. The euro holds steady with expectations that the ECB will keep domestic interest rates on hold. China's CNY remains under pressure due to continuing economic weakness. Japan maintains its warning against the sharp JPY weakness. Commodity currencies are under pressure due to concerns about a struggling Chinese economy and the prospect of fresh tariffs on a Trump win. CNY slips by 0.1%, while Asian currencies are flat on average against the USD. Trading currencies come under pressure with JPY & AUD down 0.2%, NZD dips 0.1%, MXN, SEK, NOK & CHF flat, while outlier ZAR strengthened by 0.5% against the USD.
In commodity markets. Oil prices weakened by 0.8%. Natural Gas, Soybean, and Silver prices firmed by 0.5%. Gold and Wheat prices strengthened by 0.7%. Copper prices eased by 0.3%.
CAD is holding at July lows against the USD due to weaker oil prices, a firming USD on the prospect of a Trump win, and increasing expectations of a BoC rate cut next week. Domestically, Monday saw Canadian factory sales fall 0.4% in May, below expectations of + 0.2%, and the downbeat BoC business and consumer surveys increased expectations of a second interest rate cut next week. Today, the focus will be on the Canadian inflation report, a key signal for the BoC direction at the July BoC interest rate decision.
EURCAD continues to edge higher, testing a fresh July and five-week high as the loonie continues under pressure with increasing expectations of a BoC rate cut next week.
EUR holds steady, straddling 1.0900 amid disappointing ZEW, heading into the US Retail Sales data. Investors remain on the sidelines heading into the US Retail Sales data, coupled with the markets pricing the increasing prospect of a Trump win in the November elections. Domestically, the German ZEW Survey - Economic Sentiment declined sharply to 41.8 in July from 47.5 in June. Eurozone ZEW Survey - Economic Sentiment also weakened to 43.7, down from 48.1 in June. The weakness in the eurozone ZEW is attributed to French political uncertainty, lack of clarity from the ECB, and the worsening economic outlook in Germany.
GBPEUR slips off two-year highs as investors turn cautious ahead of Wednesday's UK inflation report. The report could influence the prospect of a BoE interest rate cut as early as September.
GBP fails to breach 1.3000 as investors turn cautious with the Republican Party Conference and the US Retail Sales data. The pound struggles to extend gains amid an increasingly cautious market mood amid political uncertainty in the US. Domestically, investors are focusing on a flurry of UK data tomorrow, which includes the UK Consumer Price Index, Retail Price Index, and the PPI Core Output that will help provide hints on the Bank of England's interest rate decisions in Q3 and Q4. Intraday, the US Retail Sales will help drive the intraday direction for the pound.
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