The Morning Update

The USD strengthens, oil prices ease, equity markets are mixed, and US yields ease with markets cautious ahead of key data releases. The USD strengthens in early trading, but the USD Index remains on track for its steepest monthly decline of 2024. Currency markets are expected to be sidelined ahead of Thursday's US GDP, Jobless Claims, and Friday's crucial US inflation report. Equity markets are mixed as investors await the essential earning release from Nvidia Corp after the US close. The stock rallied over 150% in 2024, but option markets are implying a potential 10% swing after the results. Elsewhere, Bitcoin weakened over 4%, falling below $60k as part of the broad crypto market sell-off. Oil prices weakened due to demand concerns, offsetting Libya's supply risks. There are no critical economic releases today, so investors will focus on BoE Mann's and Fed's Bostic speeches to help provide intraday direction.

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In other news. Hyundai Motors targets a 30% rise in sales by 2030 as it doubles its hybrid lineup. Nvidia results could spur a record $300 billion swing in shares, options show. Ukraine drones set oil depot ablaze in Russia's Rostov, governor says. China holds 2nd day of talks on Taiwan, fentanyl with top Biden aide. The UN World Food Program launches investigation into its Sudan operations as famine spreads. China bond bulls warned of bubble risk over bumper debt supply. Italy steps up clampdown on boats rescuing migrants in the Mediterranean Sea. Air Canada offers booking flexibility for flights around possible strike deal.

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In currency markets. The USD edges higher after hitting a 13-month low of 100.51 as markets expect the Fed's first rate cut in September. JPY weakens on the BoJ Deputy Governor's less hawkish comments. AUD hits an 8-month high on Inflation data, and CNY softens on increased domestic challenges. CNY slips by 0.1%, while Asian currencies ease by 0.2% on average against the USD. Trading currencies remain mixed, with NOK tumbling 0.5%, SEK weakening by 0.35%, ZAR, JPY, CHF & NZD down 0.1%, AUD flat, and MXN rallying by 0.5% against the USD.

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In commodity markets. Oil prices weakened by 0.95%, Natural gas prices are flat, Gold prices eased by 0.3%, Silver & Copper prices tumbled by 1.5%, Wheat prices firmed by 0.4%, and Soybean prices fell by 0.6%.

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CAD eases off its five-month highs amid weakening commodity prices and a firming USD heading into Thursday's key US GDP report. CAD has benefited from investors' increasing expectations of a Fed interest rate cut in September, with markets now debating the possibility of a 50bps rate cut instead of 25bps. Domestically, economists see the BoC cutting interest rates for a third time at its September 4th meeting. Economists also forecasted that the BoC will continue cutting interest rates to 3% by next July and 2.75% in 2026. Investors will look to the US GDP & CAD Current Account on Thursday and US PCE & CAD GDP on Friday to help drive direction for the loonie.

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EURCAD continues to weaken, with the Loonie regaining all of its losses in August, but overall, the Euro remains up 2.5% in 2024. Stronger commodity prices have supported the Loonie in August. Still, given the prospects of continued BoC interest rate easing, current levels may be an area to purchase Euro if you have a near-term requirement.

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EUR is under fresh selling pressure from a strengthening USD. The single currency weakened from 2024 highs against a USD resurgence as investors started to temper their expectations of a Fed rate cut to 25bps, down from 50bps. Fed's Daly mentioned that it is difficult to envision anything to prevent a rate cut in September from the current range of 5.25%-5.50%. Market risk sentiment sours heading into tonight's Nvidia earnings and Thursday's US GDP report. Intraday, with the absence of US economic data releases, we expect the Euro to remain supported at 1.1200 heading into Thursday's data releases.

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GBPEUR extends its gains, recouping its August losses, and edges to a fresh August high, with economists expecting the BoE to keep interest rates on hold in September.

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GBP holds steady above 1.3200 despite a strengthening USD. The pound keeps on track, outperforming its peers as investors focus on interest rate divergence in 2024 among the G7 countries. Economists expect the Fed and the ECB to cut twice in 2024, while economists expect the BoE to only cut once in November. With the absence of US economic data releases today, investors will be focused on BoE's Mann and Fed's Bostic speech to provide intraday direction to the pound.