The Morning Update

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A strong start to the day as the USD, oil prices, equities, and bond yields all point higher, signaling broad market optimism. Dow Jones futures edge higher Friday, boosted by strong guidance from Alphabet and rising hopes of a US-EU trade deal before the August 1 tariff deadline. Tension between President Trump and Fed Chair Powell surfaced Thursday during a tour of the Fed’s renovation, as Trump cited a $3 billion cost—higher than the expected $2.5 billion. Powell clarified Trump included a separate building’s refurbished and reopened in 2021 in that figure. A light day for economic data, with US durable goods figures due this morning.

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News Headlines. US clears way for $8 billion Paramount-Skydance merger. FCC Chair Brendan Carr said Thursday he's pleased with Skydance's commitments to reform CBS including a pledge to end diversity programs and appoint an ombudsman to review CBS News bias complaints. Intel said Thursday it has mostly completed its planned 15% workforce cut announced last quarter amid its turnaround efforts. South Korea and the U.S. aim to finalize a tariff deal by Aug. 1, officials said after trade talks in Washington. France will officially recognise a Palestinian state in September, President Emmanuel Macron says, making it the first G7 nation to do so a move that US secretary of state qualifies as reckless. The US and Israel withdrew their negotiating teams from Gaza ceasefire talks in Qatar, with Washington accusing Hamas of not "acting in good faith". Thailand has rejected third-party mediation in its conflict with Cambodia, urging Phnom Penh to stop attacks and resolve the issue through bilateral talks.

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In currency markets. Trump's trade deal with Tokyo could pave the way for the Bank of Japan to raise rates this year, with the central bank likely to signal a brighter economic outlook. The U.S. Dollar continues to strengthen against Asian currencies, rising 0.54% against the JPY, 0.22% against the CNY, 0.43% against the THB, and 0.17% against the MYR. Broader market pressure is weighing on other emerging market currencies as well, with the ZAR down 0.63% and the MXN slipping 0.17%.

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In commodity markets. Crude oil prices rose Friday on optimism over U.S. trade talks, lifting the economic outlook. US natural gas prices rebounded after three days of losses, lifted by a smaller-than-expected storage build, suggesting tighter supply conditions ahead. Gold extends its slide in early European trade. A stronger USD, driven by steady Fed rate expectations and trade optimism, pressures the metal. However, weaker equities and concerns over Fed independence may help limit further losses ahead of next week's FOMC meeting. Soybean and wheat start the day under pressure, each down 0.55%, while lumber trades flat.

USD/CAD pair trades 0.25% higher near 1.3670 early Friday, as the US Dollar strengthens on optimism that President Trump’s renewed tariff policies will have limited economic impact.

EUR/CAD rises for a third straight day, trading near 1.6070, supported by the ECB’s decision to hold rates steady as disinflation progresses as expected.

EUR/USD is pulling back after surging on reports that the EU and US could be nearing a trade deal. The ECB is expected to pause after seven rate cuts, holding rates steady Thursday amid uncertainty over Europe-US trade relations

GBP/EUR weakens as soft UK Retail Sales data weighs on the Pound. June sales rose 0.9% MoM, below the 1.2% forecast, while annual growth also missed expectations. In contrast, the Euro holds steady ahead of Germany’s IFO survey, after the ECB left rates unchanged Thursday following four cuts this year.

GBP/USD weakens after UK Retail Sales rose just 0.9% in June, below the expected 1.2%. Year-over-year growth also missed forecasts at 1.7% vs. 1.8%. Gains from fuel and department stores were offset by declines in non-food store sales.

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