The Morning Update

The USD is flat, oil prices firmed, equity markets are up, and US yields are mixed as markets await the jobs data and the Fed minutes. The USD Index is sitting at 2024 lows, while equity markets edge higher as markets brace for the Fed minutes and the jobs revision report today. Investors will be monitoring the Nonfarm Payrolls Benchmark Revision to see if the revision calls into question the underlying strength of the US labor markets. Estimates for the revision are mixed, with Goldman & Wells Fargo expecting at least 600k weaker than currently estimated, while JPMorgan forecasts a decline of 360k. The Fed minutes are expected to take a dovish tone, which could set the stage for the Fed Chair's critical Jackson Hole speech on Friday. Elsewhere, oil prices are holding at recent lows due to increasing crude stockpiles and increasing expectations of a ceasefire in Gaza. Bitcoin eases by 0.5% in early trading, holding at $59k, while gold prices slip off recent highs and silver prices hold steady. Today's focus is the US FOMC Minutes, Nonfarm Payrolls Benchmark Revision, and CAD New Housing Price Index, which will help provide intraday direction to currency markets.

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In other news. Hamas denies 'backing off' from Gaza ceasefire talks. China opens an anti-subsidy probe into EU dairy imports in pushback against EV tariffs. UK public sector borrowing was higher than expected in July. China's $70 billion rescue plan limps off the starting line. Obama warned Democrats that they would have a 'tight race' to defeat Trump. Businesses are warning of the potential "devastating' effect of a Canadian railway strike. Sweden's central bank sees a case for further rate cuts. Ukraine attacks Moscow in one of the largest-ever drone attacks on the Russian Capital. Economists expect the Bank of Japan to raise interest rates again by the end of 2024.

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In currency markets. The USD tested its lowest level of 2024 against the Euro on increasing expectations of a Fed rate cut in September. In Asia, the Thai Baht & Indonesian Rupiah hold after the domestic rate pause. CNY is flat, while Asian currencies slip 0.2% on average against the USD. Trading currencies are mixed with JPY & SEK weakening by 0.6%, NOK falling 0.35%, NZD & ZAR slipping 0.25%, CHF down 0.1%, AUD flat, MXN gaining 0.25% against the USD.

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In commodity markets. Oil and soybean prices firmed by 0.4%, natural gas prices weakened by 0.8%, gold prices eased by 0.3%, silver prices are up by 0.25%, copper prices strengthened by 0.6%, and wheat prices slipped by 0.15%.

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CAD appears to be capped at a 1-month high at 1.3600, as there are lingering expectations that the BoC will cut its domestic interest rates by another 25% at its September meeting after the Canadian inflation level continues to ease month over month. Tuesday saw the CAD Consumer Price Index ease to 2.5%, its lowest level since early 2021, and is expected to set the stage for the BoC to continue to cut its domestic interest rates. Our bias remains to buy USD near current levels with the prospect of BoC cutting interest rates three more times in 2024. Intraday, the Fed Minutes, and the revision of the NFP will provide direction to the currency markets.

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EURCAD slips off monthly/multi-year highs as investors take profits ahead of a possibly volatile market session heading into today's NFP revision.

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EUR is finding a cap at 1.1150 as the USD recovers heading into the Fed minutes and Jobs revision. The Euro holds near eight-month highs against the USD, with the greenback under pressure on increasing expectations of a Fed rate in September. Domestically, ECB's Rehn suggested that the ECB may need to lower interest rates in September due to economic weakness and the rise in negative growth risks in the eurozone area. The FOMC minutes will be a key focus for investors as they should provide some guidance to the Fed Chair's speech on Friday.

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GBPEUR holds steady above 1.1700, with investors cautious ahead of eurozone and UK PMI data releases on Thursday.

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GBP struggles to hold above 1.3000 as the pound comes under pressure as USD demand returns. The pound's strong rally from 1.2600 is starting to stall as investors turn cautious ahead of today's US NFP revisions and the Fed minutes, which are expected to provide fresh cues on the Fed's policy path. Domestically, the rising cost of public services and benefits has driven government borrowing to higher than expected in July to GBP 3.1 bn, the highest level since July 2021. Intraday, the US Fed Minutes, and the revised NFP data will drive direction for the pound.