The Morning Update

The USD eased, oil prices firmed, equities were mixed, and U.S. yields rose as markets focus on a busy week of central-bank rate decisions. The USD eases in early trading with a 25 bp Fed cut widely expected mid-week, the dollar index has a mild downside bias into the decision, with only a hawkish pushback from the Fed expected to provide support for the greenback. Global equities were mixed: Chinese shares fell after a preliminary antitrust finding against a major chipmaker, while Europe rose about 0.3% led by luxury names. Sentiment is capped by Fitch’s downgrade of France to A+, and attention now turns to the BoE, where markets mostly expect a hold with guidance on the path to future cuts and QT in focus; the MSCI Asia Pacific briefly topped its February 2021 peak before easing. With the Fed widely expected to cut 25 bps mid-week, attention also turns to the BoC on Wednesday, the BoE on Thursday, and the BoJ at week’s end—together covering half of the world’s 10 most-traded currencies. CAD will hinge on BoC guidance about the end of easing, GBP on BoE messaging around services inflation and QT, and JPY on any hint of intervention, while the USD path depends on how the Fed frames its move. Elsewhere, oil prices gain following the Ukraine attack on a Russian oil facility, Bitcoin slipped below $115,000, gold and silver prices both fell in early trading. In focus this week; Monday sees the ECB Schnabel speech and NY Empire State Manufacturing. Tuesday, UK employment reports, German & EU ZEW Economic Sentiment, CAD CPI, US Retail Sales. Wednesday, UK CPI, ECB President Lagarde Speech, BoC & Fed Interest Rate decisions. Thursday, UK Interest Rate Decision. Friday BoJ interest rate Decision, and CAD Retail Sales will help direction to currency markets this week.

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In the news. China says Nvidia violated antitrust law for Mellanox acquisition. Fed set to cut interest rates as Powell faces dissent over slowing economy. Far right makes electoral gains in Germany's most populous state. US Democrat press Trump for a trade deal that curbs China's production. UK and US to announce tech and energy deals during Trump's visit. Canada announces a new federal agency to build affordable housing. Canadian home sales rise for fifth straight month in August. Thailand said to weigh tax on Gold trades to slow Baht rally. Trump backs sanctions if NATO stops buying Russian oil. Ukraine stepping up drone attacks on Russian oil assets. France's borrowing costs rise after Fitch downgrades France's credit rating in a new debt blow. Tesla shares gain after Musk discloses purchase of 2.57 million shares.

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In currency markets. The New Zealand dollar rose about 0.5% as a softer USD and strength in the Aussie helped lift antipodean FX ahead of a central-bank-heavy week. The rand and the Swedish krona also firmed, supported by improved risk sentiment and ongoing dollar slippage. The CNY is flat, while Asian currencies firmed by 0.1% on average against the USD. Trading currencies improve, with NOK, CZK & KWS are flat, CHF, MXN, JPY and DKK firmed by 0.15%, AUD, SEK, and PLN gained by 0.3%, and NZD strengthened by 0.55% against the USD.

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In commodity markets. Oil & Natural Gas prices firmed by 0.3%. Gold prices down 0.1%. Silver prices eased by 0.25%, Copper prices gained by 0.25%. Wheat prices fell by 0.4%, and Soybean prices weakened by 0.6%.

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CAD holds steady above 1.3800 after a second weekly decline as one-month implied FX volatility sits below 4%, a one-year low. Into Wednesday, roughly 80% of economists expect the BoC to cut 25 bps, and the Fed is also widely seen trimming 25 bps mid-week. The domestic backdrop is soft—–65.5k jobs in August, Q2 GDP –1.6%, and capacity use around 79.3%—with firmer oil and slightly higher GoC yields offering only limited support. With volatility muted, the near-term USD/CAD path will hinge on how dovish the Fed sounds and what the BoC signals about the end-game for easing. Intraday, we expect the loonie to hold steady heading into Tuesday's CAD inflation report and Wednesday's BoC interest rate decision.

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EURCAD is consolidating just below recent 52 week highs of 1.6258 as markets await expected 25 bp cuts from the BoC and the Fed, with guidance likely to matter more than the moves. Unless the BoC surprises hawkish or oil pops materially, the bias favours euro to continue to test higher with 1.6350 target in Q4/25.

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EURUSD is steady around 1.1750 as the dollar stays soft ahead of this week’s Fed decision. Euro upside is capped by lingering fallout from Fitch’s downgrade of France and heightened geopolitical risk after NATO forces in Poland intercepted Russian drones. With the ECB steady and Fed guidance still to come, the pair remains range-bound for now. We expect the euro to stall around current levels with investors sidelined, focusing on Wednesday's Fed interest rate decision.

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GBPEUR firmed to start the week as markets look for the BoE to hold rates, with any signals on a slower pace of QT likely to drive the next move. Euro sentiment remains fragile after Fitch’s downgrade of France to A+, creating a mild headwind for the single currency. Near term, a steady BoE and a softer USD backdrop keep the cross supported, but a dovish tilt from the BoE could see it drift back into its recent range.

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GBPUSD is strengthening into a busy week, with a 25 bp Fed cut on Wednesday and a BoE hold on Thursday in focus. The UK labour report lands Tuesday, with markets watching wage growth and unemployment after recent readings put joblessness near 4.7% and pay still elevated. A clear cooling in earnings could nudge BoE cut bets higher and give sterling a short-term lift, while sticky wages would keep cable largely range-bound.