The Morning Update

The USD firms, oil prices are strengthening, equity markets are down, and US yields are mixed, with geopolitics, the Fed and inflation in focus this week. The USD firms in early trading as risk sentiment wanes, as Ukraine and EU leaders head to Washington. Global equity markets ease off near all-time highs as investors shift their focus to the possibility of a peace deal for Ukraine and signals from the Federal Reserve on interest rates. Investors will also stay cautious ahead of the Federal Reserve's annual retreat at Jackson Hole later in the week, with Chairman Jerome Powell's speech closely watched for guidance on a September interest-rate cut. "Powell's guidance at Jackson Hole will therefore be important in showing how he balances the focus on inflation versus growth and labour markets," Said Chris Western of Pepperstone Group. In focus this week. Monday, sees a light economic docket. Tuesday, CAD Inflation, US Building Permits, and Fed Bowman speech. Wednesday, the Jackson Hole Symposium begins, the UK Inflation Report, UK Retail Sales, ECB's President Lagarde speech, and FOMC minutes. Thursday, German & EU PMI reports, UK PMI reports, US PMI reports. Friday, German GDP, Retail Sales, CAD Retail Sales, US Fed Chair Powell Speech.

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In the news. Trump tells Ukraine to give up on NATO and Crimea ahead of Zelensky meeting. Wildfires spread dangerously close to southern European capitals. Israeli protesters hold mass rally to demand Gaza hostage deal. EU Push to protect digital rules holds up trade statement with the US. India proposes slashing taxes on small cars under Modi reforms, sending shares higher. Air Canada grounded as striking union defies order to get back to work. Trump says Xi told him China will not invade Taiwan while he is the US president. Carney to visit Mexico next month as both countries navigate tense US relations.

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In currency markets. Currency markets are cautious in early trading ahead of a busy week of inflation and growth data. CNY is flat, while Asian currencies on average ease by 0.1 % against the USD. Trading of currencies are mixed, with SEK and CZK weakening by 0.45%. MXN & NOK falling 0.35%. CHF, JPY, DKK & PLN easing 0.25%, AUD firmed 0.2% and NZD strengthened by 0.4% against the USD.

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In commodity markets. Oil prices strengthened by 0.9%. Natural Gas prices tumbled by 3.3%. Gold firmed by 0.3%. Silver prices gained by 0.55%. Copper & Soybean prices fell by 0.4%, and Wheat prices weakened by 0.5%.

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CAD straddles 1.3800, edging higher in early trading ahead of a busy week with focus on CAD CPI and Retail sales. Markets are forecasting Tuesday's CAD CPI to ease to 1.7% in July, down from 1.9% in June. At the same time, Friday's Retail sales are expected to rally to 1.65% in June, after weakening by -1.1% in May. The Bank of Canada is widely expected to cut interest rates at its September meeting, driven by cooling inflation and a desire to stimulate economic growth. We expect CAD to hold within its current trading range, given the lack of high-tier economic data to provide guidance.

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EURCAD eases off multi-year highs ahead of a busy week of geopolitics and inflation reports.

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EUR slips below 1.1700 ahead of the Trump-Zelensky meeting. The euro comes under early selling pressure ahead of a key meeting between Trump, Zelensky and EU leaders in Washington on a potential Russia-Ukraine peace deal. We anticipate that investors will remain cautious this week, ahead of a flurry of inflation reports on Wednesday and Thursday, as well as the Jackson Hole symposium, for clues on the Fed's September decision. Intraday, we expect the euro to find support at 1.1650 with the lack of market-moving data releases today.

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GBPEUR holds steady in early trading as markets focus on the Trump-Zelensky meeting.

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GBP is sidelined on geopolitics and a quiet economic calendar. The pound is in a tight trading range straddling 1.3550 as PM Starmer joins other EU leaders and Zelensky at the White House to discuss the terms laid down by Russia for ending the war in Ukraine. Domestically, investors will focus on the UK CPI report for July on Wednesday, as it will influence market expectations for the BoE's monetary policy outlook. The primary trigger for the USD will be the Jackson Hole symposium from Wednesday to Friday, with a focus on Fed Chair Powell's comments on Friday for fresh cues on the interest rate outlook. Intraday, we expect the pound to hold on within its current trading range.

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