The Morning Update

The USD holds steady, oil prices slip, equity markets are mixed, and US yields ease ahead of the US inflation report. The U.S. dollar is steady in early trading, underpinned by renewed Gulf tensions and continued uncertainty over the Strait of Hormuz. Attention is firmly on today’s U.S. CPI report, with the inflation data expected to be the key driver of Fed rate expectations and near-term dollar direction. Global equity markets are mixed, while U.S. futures move higher as upbeat AI-related earnings support technology shares. Investors remain cautious ahead of today’s key U.S. CPI report, with the inflation reading likely to shape Fed rate expectations and broader market direction. Elsewhere, oil prices slip modestly after their recent rally, although ongoing U.S.-Iran tensions and disruption around the Strait of Hormuz keep supply concerns elevated. Gold strengthens ahead of today’s U.S. CPI report, while Bitcoin edges higher in early trading. In focus today: Markets will be watching U.S. CPI inflation, including the core readings, with headline CPI expected to ease to 3.4% from 3.5%, alongside Canadian building permits, with the releases expected to provide fresh direction for currency markets.

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News Headlines. JD Vance asked Ukraine to halt strikes on tankers using Russian port. Bank of America commits $250 billion to US projects in boost to 'America First' agenda. Panama Canal fees hit record high as El Nino and Iran war chokes shipping. The US fires on ship it says violated Iran blockade. Taiwan hits out at China over naval drill with Indonesia. Heatwaves push European gas prices close to Iran war highs. Meta and 29 states head to court in biggest test yet of youth social media litigation. Air Canada cuts outlook after jet fuel cost soars nearly 50%. CUSMA breakdown could mean hundreds of thousands of jobs and a trillion dollars lost.

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In currency markets. Against the U.S. dollar, currency markets remain sidelined in tight trading ranges as investors avoid taking fresh positions ahead of today’s key U.S. CPI report. The yen remains under pressure above 159, while the euro and sterling trade little changed around 1.1540 and 1.3500 respectively.

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In commodity markets. WTI -0.24% | Nat Gas +0.94% | Gold +0.88% | Silver +2.52% | Copper +0.81% | Palladium +1.69% | Coffee +1.22% | Cocoa +1.96% | Soybeans +0.49% | Wheat +3.24%

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CAD slips modestly in early trading after reaching a two-month high yesterday, although Friday’s strong Canadian jobs report continues to provide underlying support. The loonie remains sensitive to oil prices and Canada-U.S. trade negotiations, with concerns over a potential CUSMA breakdown clouding the economic outlook; recent analysis warns that a full breakdown could materially weaken trade, investment and employment and potentially push Canada into recession. Today’s U.S. CPI report is expected to drive broader U.S. dollar direction.

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EURCAD holds steady below the 1.6100 level after five consecutive sessions of declines, with softer oil prices limiting support for the Canadian dollar while German inflation data provides little impetus for the euro. Trading remains subdued ahead of today’s key U.S. CPI report, which is expected to drive broader currency direction.

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EUR remains subdued around the 1.1540 level after German inflation accelerated to 2.8% in July, driven largely by higher energy costs. Stronger Eurozone Q2 GDP provides some underlying support, with the economy expanding 0.4% quarter-on-quarter, twice the 0.2% forecast, although renewed Middle East uncertainty favours the U.S. dollar ahead of today’s key U.S. CPI report.

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GBPEUR edges higher, holding above the 1.1700 level as the pound continues to outperform despite German inflation accelerating to 2.8% in July. Higher energy prices and renewed Middle East tensions remain a headwind for the euro, while attention turns to Thursday’s preliminary UK Q2 GDP report for the next domestic catalyst for sterling.

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GBP holds steady above the 1.3500 level as traders remain sidelined ahead of today’s key U.S. CPI report. Attention then turns to Thursday’s preliminary UK Q2 GDP data, while continued U.S.-Iran tensions and elevated Fed rate expectations provide underlying support for the U.S. dollar.