The Morning Update

The USD is steady, oil continues under pressure, equity markets are up, and US yields rally as risk sentiment improves. The U.S. dollar holds near 13-month highs as investors continue to price in at least one Federal Reserve rate hike this year. The greenback is on track for its strongest monthly gain in almost a year, supported by widening interest rate differentials and resilient U.S. economic data. Investors now await the core PCE inflation report for further clues on the Fed's policy outlook. Global equity markets are mostly higher, with U.S. futures advancing after Micron Technology's strong earnings and upbeat outlook boosted confidence in the AI sector. Investors now await the U.S. core PCE inflation report for fresh clues on the Federal Reserve's interest rate path. Meanwhile, U.S.-Iran peace talks continue, supporting market sentiment and helping keep oil prices under pressure. Elsewhere, oil prices continue to weaken, down roughly 24% in June to their lowest levels since before the Iran conflict as progress in U.S.-Iran peace talks eases supply concerns. Gold prices remain under pressure while Bitcoin rebounds as broader risk sentiment improves. Today's busy U.S. economic calendar is headlined by the Fed's preferred Core PCE inflation report, alongside GDP, durable goods orders, and weekly jobless claims, with the data expected to provide important guidance on the strength of the U.S. economy and the outlook for Federal Reserve policy.

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News headlines. Oil price back at prewar levels as Gulf flows pick up. Rome airports warn of summer 'disaster' unless the EU border controls are suspended. Two major earthquakes strike Venezuela, killing at least 164. Senate Democrats investigate Trump family-linked group over Venezuela business push. EasyJet in talks with Castlelake after rejecting GBP 4.9 billion takeover offer. German drugmaker Merck to buy Bio-Tecne in $11.3bn deal. Stocks rally as Micron buoys AI trade ahead of PCE. "We've fallen behind": Canada races to break supply chain gridlock choking trade. White House seeks $88bn from Congress as Trump clashes with Republicans.

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In currency markets. Against the USD, major currencies are largely sidelined ahead of today's U.S. Core PCE inflation report, the Federal Reserve's preferred measure of underlying inflation, which is expected to provide fresh direction for interest rate expectations. A stronger-than-expected reading would reinforce expectations of further Fed tightening and support the U.S. dollar, while a softer outcome could ease rate-hike expectations and weigh on the greenback.

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In commodity markets.Oil -1.12% | Nat Gas +2.09% | Gold -0.10% | Silver -1.15% | Copper +1.51% | Palladium +1.20% | Coffee +1.60% | Cocoa +3.86% | Soybeans +0.21%

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CAD remains under pressure near 14-month lows against the U.S. dollar, with traders turning their attention to today's U.S. Core PCE inflation report, the Federal Reserve's preferred inflation gauge. Minutes from the Bank of Canada's latest policy meeting offered little support for the loonie, reinforcing a cautious policy stance as markets continue to monitor trade developments and commodity prices. A stronger-than-expected U.S. inflation reading would likely provide further support for the U.S. dollar and keep pressure on the Canadian dollar.

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EURCAD is little changed in early trading as both the euro and Canadian dollar remain sidelined ahead of the U.S. Core PCE inflation report, with investors awaiting fresh direction from the Federal Reserve's preferred inflation gauge. The euro is expected to remain supported against the Canadian dollar in the near term as weaker oil prices continue to weigh on the commodity-linked loonie.

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EUR is sidelined, straddling 1.1350 as investors await today's U.S. Core PCE inflation report, with the recent U.S. dollar rally pausing ahead of the key data release. While stronger German business sentiment and relatively hawkish ECB commentary have helped stabilize the single currency, market direction will likely hinge on whether the Fed's preferred inflation gauge reinforces expectations for further U.S. rate hikes.

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GBPEUR inches higher in early trading as investors scale back expectations for further ECB rate hikes following recent dovish comments from ECB President Christine Lagarde. While UK political uncertainty remains in focus, expectations that Eurozone policy tightening is nearing its peak continue to provide modest support for sterling against the euro.

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GBP is flat in early trading below 1.3200 as investors await today's U.S. Core PCE inflation report, the Federal Reserve's preferred inflation gauge, for fresh direction. Expectations for further Fed tightening and ongoing UK political uncertainty continue to limit upside for sterling, with the pound remaining under pressure against the broadly stronger U.S. dollar.

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