The Morning Update

The USD is steady, oil prices weaken, equity markets are down, and US yields are mixed as fresh US tariffs rekindle global trade tensions. The USD index holds near two-month highs, up over 2.5% this week, after President Trump reaffirmed a 10% baseline global tariff and imposed reciprocal duties of up to 41% on countries without trade agreements. Global equities selloff extended to a sixth day, the longest streak since September 2023, after the US's sweeping import tariffs raised concerns about future global growth and inflation. "next week marks a significant turning point for global trade with the introduction of Trump's tariffs, creating uncertainty about how these new and historical barriers will affect markets in practice," said Kim Heuacker, at Camarco. "Current high valuations, particularly among US stocks, are becoming increasingly difficult to justify." Elsewhere, oil prices weaken on investor concern about demand following the announcement of US tariffs. Bitcoin falls 1.5% to $115k, silver and gold prices weaken, with gold set for its third weekly loss. In focus today, US Average Hourly Earnings, Nonfarm Payrolls, CAD S&P Global Manufacturing PMI, US ISM Manufacturing PMI, and the Michigan Consumer Expectations and Sentiment Index to help provide intraday direction to currency markets.

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In the news. Trump reignites global trade war with sweeping tariff regime. Eurozone inflation remained at the ECB's 2% target in July. Trump envoy Witkoff meets Netanyahu in Israel. Russia intensifies attacks on Ukraine despite Trump ultimatum. Trump raises tariffs on Canada to 35%, keeps USMCA exemption. Bond traders await jobs report for clues on Fed's rate-cut path. Canada's economy grew in June, avoiding a contraction in the second quarter. Asia's factory activity worsens as the US trade uncertainty bites. 'Stand our ground, ' Ford calls for a 50% tariff on US steel and aluminum. DOW futures drop 400 points after Trump issues new tariffs.

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In currency markets. Currency markets continue under pressure as the USD extends gains to multi-month highs, the CHF touches six-week lows, CAD is heading for its seventh straight weekly loss, and EUR records its first monthly decline of 2025, with a 3% decline in July. CNY fell 0.2%, while Asian currencies on average slipped by 0.1% against the USD. Trading currencies are mostly under pressure, with ZAR tumbling 0.7%, MXN & NZD weakening 0.45%, SEK & NOK falling 0.3%, CHF & PLN easing 0.2%, CZK, DKK & AUD down 0.1%, KWD flat and JPY gained by 0.2% against the USD.

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In commodity markets. Oil prices fell 0.35%. Natural Gas. Silver & Wheat weakened by 0.55%. Gold & Soybean prices fell 0.1%, Soybean prices are flat, and Copper prices rallied 1%.

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CAD extends losses to fresh 10-week lows after the US signed an executive order raising tariffs from 25% to 35% on Canadian products not covered under the USMCA agreement. Trump also announced a 40% transshipment tariff on goods rerouted through third countries to avoid the duties. This week, the BoC kept rates on hold, but BoC Governor Macklem noted that the door remains open for rate cuts if conditions warrant. The loonie is on track for its worst performance since late February. Intraday, the focus will be on the CAD Manufacturing PMI and US Nonfarm payrolls to provide direction to the loonie.

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EURCAD slips after the eurozone annual inflation holds steady, keeping the prospect of an ECB rate cut alive in 2025.

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EUR stalls above 1.1400, but remains vulnerable to further weakness into the US NFP report. The euro continues under pressure after suffering one of its worst week performances, tumbling almost 3% following the announcement of the EU-US trade agreement. This week marked the euro's first monthly loss of 2025, as investors assessed the impact of the EU-US trade agreement, which saw tariffs increase from 2% to 15%. The focus will be on today's US jobs report; if we see a surprise NFP combined with an unemployment rate of 4.1% or lower, this could feed into expectations of a Fed rate hold in September and put further selling pressure on the euro.

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GBPEUR extends losses, down over 500 bps in 2025, with the pound under pressure, with markets expecting the BoE to cut rates to 4% next week.

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GBP hits a fresh three-month low heading into the US jobs report. The pound continues under selling pressure, posting its worst monthly performance against the USD in three years. The pound fell nearly 4% in July, its most significant decline since September 2022 during the UK's "mini-budget crisis", which also sparked turmoil across the UK bond market. Investors are focusing on next week's Bank of England meeting, with markets expecting the bank to cut interest rates by 0.25% to 4%, their lowest in 2 1/2 years. Intraday, the US jobs reports will be the primary driver for the pound.

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