The Morning Update

The USD steadies, oil prices ease, while equity markets and US yields are mixed ahead of the key US jobs report. The U.S. dollar slips for a second day as oil prices stabilize and markets reassess the outlook for a September Fed rate hike ahead of Friday’s nonfarm payrolls report. Global equity markets are broadly steady to slightly firmer, with U.S. futures edging higher and European stocks recovering after three days of declines as the recent rise in energy prices shows signs of moderating. Elsewhere, oil prices ease after a three-day rally, while gold strengthens and Bitcoin remains under pressure as investors continue to position cautiously ahead of key U.S. labour-market data. Today’s economic calendar includes U.S. initial jobless claims, ISM Services, Canadian trade data and employment-related releases, alongside further central-bank commentary ahead of Friday’s payrolls report.

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News headlines. The manager of Norway's $2 trillion oil fund proposes slashing US Treasury holdings. Volkswagen jumps 6% on plans to cut 50,000 jobs amid tariffs and competition from China. The global bond sell-off is likely not over yet, Mohamed El-Erian tells CNBC. UK is failing to capitalize on Brexit, says top Trump trade official. Giorgia Meloni celebrates Italy's longest-serving government since 1945. China lashes back at the US over G20 row ahead of Xi-Trump summit. Carney dismisses 'unelected' Trump officials' explanation of why trade talks fell apart. The EU to shore up Arctic ties with fresh Greenland funding.

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In currency markets. Against the USD, the JPY, NOK and SEK remain under pressure heading into today’s U.S. payrolls report, with the dollar holding firm as traders avoid adding risk ahead of the data. JPY has pulled back from its recent highs despite ongoing expectations for further BoJ tightening, NOK is being weighed down by softer oil prices, and SEK remains vulnerable amid a cautious Riksbank outlook. A stronger-than-expected NFP print would likely reinforce Fed tightening expectations and add further pressure to all three currencies, while a weak report could quickly reverse the move.

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In commodity markets. WTI -0.85% | Nat Gas +0.55% | Gold -0.42% | Silver -0.38% | Copper -0.32% | Palladium -1.31% | Coffee +0.78% | Cocoa +0.91% | Soybeans -0.11% | Wheat +0.17%

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CAD trades broadly steady, holding above 1.3800 ahead of today's Canadian and US employment reports, which could generate significant volatility given the implications for both BoC and Fed policy. Canada's unemployment rate is expected to remain at 6.4% after employment surged by 75,100 in July, while the US is expected to report only modest payroll growth following July's 23,000 decline; later, Canada's Ivey PMI is forecast to improve to around 56.2 from 55.1, signalling continued expansion in business activity.  With trade tensions and softer oil prices continuing to present headwinds, stronger Canadian employment and Ivey data could support the loonie, although the near-term bias remains toward a weaker CAD if domestic data disappoint or the US jobs report revives demand for the dollar.

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EURCAD is little changed, holding below 1.6050 heading into today’s Canadian employment and Ivey PMI data, after falling earlier in the week as the loonie benefited from the Bank of Canada’s more hawkish inflation stance. The euro remains broadly supported by expectations for an ECB rate hike next week, but with both currencies carrying relatively firm rate expectations, the cross has settled into a narrow range. A strong Canadian jobs or Ivey print would likely favour CAD and pressure EURCAD lower, while softer data could see the cross recover.

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EUR remains largely sidelined against the USD ahead of today’s U.S. payrolls report, with upbeat German factory orders offset by softer Eurozone retail sales and mixed services data. The euro continues to draw underlying support from expectations that the ECB will raise rates by 25 basis points at next week’s meeting, with markets almost fully pricing in a September hike as policymakers remain focused on elevated inflation risks from higher energy prices. Near-term direction is likely to be driven primarily by the U.S. jobs data and its implications for Fed policy.

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GBPEUR edges higher in early trading, recovering modestly from this week’s losses as the pound benefits from hawkish comments by Bank of England Chief Economist Huw Pill, who argued that higher rates may be needed to contain persistent inflation pressures. The euro remains broadly supported but has struggled to extend recent gains, leaving the cross near 1.1640 as investors await further guidance from BoE officials and next week’s ECB decision

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GBP pulled back from session highs near 1.3550 after Bank of England Governor Bailey pushed back against expectations for an imminent September rate hike, stressing the need for policy flexibility. The pound remains supported by sticky UK inflation and Huw Pill’s call for the Bank Rate to rise to 4%, but fiscal concerns and elevated geopolitical risks continue to limit upside. Attention now turns to today’s U.S. payrolls report.

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