The Morning Update

The USD eases, oil prices fall, equity markets are up, and US yields rise as bond panic fades. The USD eased from recent two-month highs, snapping a five-day run of gains as Treasury yields pulled back and oil prices retreated. Global equity markets moved higher as the recent bond selloff faded, with U.S. futures advancing and European shares extending weekly gains; the 10-year Treasury yield eased to around 5.16% after its sharp two-day rise, although longer-term yields remain elevated amid concerns over inflation, government borrowing and further Fed tightening. Elsewhere, oil prices retreated on reports of possible progress toward reopening the Strait of Hormuz, while gold and bitcoin firmed modestly. Today's focus will be on US Durable Goods Orders, Michigan Consumer Sentiment, UoM 1 & 5 year Consumer inflation expectations and speeches from ECB & FED officials to help provide guidance to the markets.

‍

News Headlines. Trump to wrap up Xi summit with a tour of US archives. Allies unite behind Saudi Arabia as Houthis step up attacks. US and Iran discuss phased deal to reopen Hormuz and end US blockade. The White House reinstates access to CNN, MS Now and Politico following judge's order. Netanyahu defends Israel as delegates walk out. Brussels pushes Trump to maintain 'free flow' of diesel. Russia expands fleet as crackdown on stateless vessels intensifies. EU urges UK to raise tariff's on Chinese cars to avoid 'made in Europe' barriers. Canada to develop carbon removal market framework under the Paris agreement.

‍

In currency markets. Against the USD, JPY strengthened sharply and headed for its biggest daily gain in two weeks after Finance Minister Katayama’s latest comments increased market sensitivity to the risk of currency intervention. She said President Trump had raised concerns about the yen during talks with Prime Minister Takaichi earlier this week, helping pull USD/JPY back from levels approaching 160 and reinforcing caution among traders about pushing the yen materially weaker.

‍

In commodity markets. WTI -1.77% | Nat Gas -3.82% | Gold +1.03% | Silver +2.06% | Copper -0.02% | Palladium -0.98% | Coffee +1.27% | Cocoa -0.68% | Soybeans -1.01% | Wheat -2.19%

‍

CAD held broadly steady after touching a fresh two-month low, with the loonie still pressured by softer domestic demand and a strong U.S. dollar. July retail sales fell 0.7%, adding to concerns about the Canadian growth outlook and limiting expectations for further Bank of Canada tightening, although a preliminary estimate pointed to a 1.3% rebound in August. Oil prices eased today, removing some support for the currency, while ongoing U.S.-Canada trade uncertainty continues to weigh on sentiment.

‍

EURCAD firmed as the loonie underperformed its peers, with softer Canadian retail sales and easing oil prices weighing on CAD. The euro was comparatively steadier, allowing the cross to move higher despite lingering caution around the Eurozone outlook.

‍

EUR edged above three-month lows despite weaker German consumer confidence, elevated energy costs and hawkish Fed commentary continuing to weigh on the single currency. German GfK consumer confidence deteriorated more than expected, while rising U.S. yields and expectations for further Fed tightening continue to favour the dollar.

‍

GBPEUR inched higher after BoE Governor Bailey said the risk from elevated energy prices remains skewed toward higher inflation, while noting that second-round effects and domestic price pressures have so far been limited.  The euro remained constrained by a sharper-than-expected deterioration in German consumer confidence, giving GBP a modest relative advantage and keeping the cross slightly firmer.

‍

GBP advanced against a softer USD, with the pound recovering modestly from recent multi-month lows. BoE Governor Bailey said the pass-through from higher energy prices has remained subdued so far, but warned that a prolonged period of elevated energy costs could make it harder for the Bank to keep rates unchanged. Attention now turns to today’s U.S. durable goods data and final University of Michigan consumer sentiment reading for direction, with stronger figures likely to reinforce expectations for further Fed tightening.

‍