The Morning Update

The USD is steady, oil prices edge higher, equity markets are mixed, and US yields ease as investors focus on tech earnings. Currency markets are steady as investors await Wednesday's EU, UK, and US inflation data. Equity markets are mixed, heading into a heavy week of tech earnings. Companies representing 29% of the S&P 500 are due to report this week, with Tesla and Alphabet due to report later today. US politics remains front and center, with Kamala Harris securing enough delegates to clinch the Democratic presidential nomination. Elsewhere, oil prices edge off six-week lows, Bitcoin dropped 1.5%, gold prices strengthened through $2,400, and copper remains under pressure on China growth concerns. In focus today, EU Consumer Confidence, and US Existing Home Sales will help provide intraday direction to currency markets.

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In other news. Kamala Harris secures enough delegates for the Democratic nomination. Porsche shares fell the most on record after the company lowered its outlook for 2024. US Secret Service chief says Trump's shooting worst 'failure' in decades. Wiz walks away from a $23 billion deal with Google and will pursue an IPO. Farnborough Air Show kicks off with $51 billion in deals as Airbus shows off the new ultra-long-haul jet. Delta cancels hundreds more flights in struggle to recover from Microsoft outage. An evacuation order was issued for Jasper National Park as the wildfire closed in. UPS's quarterly profit falls on high labor costs and weak small-package demand.

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In currency markets. JPY continues to rise as investors look to the BoJ to hike rates to boost the currency. Sterling slips as markets await Wednesday's PMI data for BoE direction. AUD & NZD extend losses over ongoing China growth fears. CAD hits a 5-week low head of BoC rate decision on Wednesday. CNY and Asian currencies hold steady on average against the USD. Trading currencies are mixed, with ZAR & NOK weakening 0.7%, AUD, SEK & NZD falling 0.3%, MXN & CHF slipping 0.1%, and JPY rallying 0.7% against the USD.

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In commodity markets, oil and Natural Gas prices are up by 0.2%, Gold prices strengthened by 0.6%, silver prices slipped by 0.35%, copper prices dropped by 0.7%, wheat prices tumbled 1.15%, and soybean prices are flat.

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CAD continues under selling pressure, dropping to a nearly six-week low on commodity price concerns and the prospect of a 25 bps interest rate cut by the Bank of Canada on Wednesday. "The CAD's focus this week falls squarely on Wednesday's BoC policy decision where a 25 bps cut is more or less fully priced in at this point," Shaun Osborne, chief currency strategist at Scotiabank, said in a note. Wednesday may be a buy the rumour, sell the fact, which could see CAD find support at 1.3800.

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EURCAD slips off an 8-month high as markets consolidate, heading into today's EU Consumer Confidence and Wednesday's inflationary PMI data reports.

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EUR weakens through 1.0900 amid a dovish ECB and increasing China slowdown concerns. There are growing concerns about a slowing Chinese economy, with GDP at its slowest pace in five quarters and retail sales at its slowest pace since December 2022. Meanwhile, both Democrats and Republicans are threatening to increase trade restrictions with China, which will put pressure on China to boost domestic stimulus. On Monday, ECB Kazimir said the market pricing of two rate cuts by the end of 2024 "was not entirely misplaced," increased speculation of a September rate cut. The intraday focus will be on the EU Consumer Confidence, but investors are expected to keep their powder dry ahead of Wednesday's PMI data release.

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GBPEUR holds steady heading into Wednesday's UK & EU PMI data to help provide signals for the respective central bank cuts in September.

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GBP slips to a two-week low as the US steadies and investors eye a BoE rate cut. The pound turns defensive as it breaks through 1.2900, and the USD recoups losses following Biden's stepping down. Markets need fresh trading impetus with the lack of high-tier economic data releases. The pound has been the best-performing currency against the USD in 2024, supported by stickier domestic inflation and boosted by Labour winning with a clear mandate. The focus will be on Wednesday's PMI data as inflation levels have been easing in the last quarter, which has seen an increase in expectations that the Bank of England could join the Fed & ECB to cut interest rates in September. Intraday, we expect the pound to find support on dips towards 1.2850.