The Morning Update

The USD is steady, oil prices are weakening, equity markets are rallying, and US yields are easing amid improving risk sentiment. The USD held broadly steady near recent highs after last week’s hawkish Fed rate hike, with markets continuing to assess how much further U.S. rates may need to rise. Attention is also turning to the Trump-Xi summit later this week, where trade, AI, supply chains and Middle East tensions are expected to feature prominently, while investors remain focused on whether easing oil prices and a calmer risk backdrop reduce some of the recent inflation pressure. Global equity markets rallied at the start of the week, with U.S. futures and European shares higher and technology stocks leading gains as lower oil prices eased inflation concerns and improved risk appetite. Positive signals from U.S.-China talks ahead of the Trump-Xi summit added to the upbeat tone. Elsewhere, oil prices weakened, and gold eased in early trading. Bitcoin rallied through $85,000 to an eight-month high, supported by renewed institutional and ETF inflows, improving risk appetite ahead of the Trump-Xi summit and short-covering after the cryptocurrency broke decisively above the $80,000 level. Today's focus will be on interest rates, with speeches from Fed Goolsbee, BoC Governor Macklem, and ECB President Lagarde.

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News Headlines. Trump to be sued by CNN, Politico, and MS NOW to reverse White House ban. Bitcoin hits $85,000 for the first time in eight months. China's President Xi to visit the US from September 23-25. Merz fights for survival after record German election defeat. ECB launches key link between Blockchain and Euro Payment System. Australia warns of risks from ageing population, and falling birth rates. Bessent hails US-China AI dialogue ahead of Trump-Xi meeting. VW ejected from the European blue-chip index in blow to crisis-hit carmaker. Canada's Carney calls for stronger ties with France amid new global threats. Canada optimistic about concluding trade talks with India by year-end, minister says.

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In currency markets. Against the USD, currency markets were mostly subdued after last week’s wave of central-bank hikes, with the dollar index holding near 100.20 after gaining more than 1% on the Fed’s hawkish move. CNY was the standout, strengthening to a fresh 3½-year high near 6.6950 as the PBOC eased its resistance to appreciation ahead of this week’s Trump-Xi summit, while most other major currencies continued under pressure as investors reassessed the global rate outlook.

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In commodity markets. WTI -2.97% | Nat Gas -1.20% | Gold -0.80% | Silver -0.59% | Copper +1.39% | Palladium -0.49% | Coffee -0.75% | Cocoa +2.83% | Soybeans +0.48% | Wheat +1.09%

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CAD extends its decline to fresh multi-week lows, with USD/CAD pushing above 1.40 as wider US-Canada yield spreads and weakening oil prices add to pressure on the loonie. The currency has now fallen for eight consecutive sessions, its longest losing streak since May, following last week’s Fed rate hike and a signal that further tightening may follow. Attention now turns to Bank of Canada Governor Tiff Macklem’s speech today, with markets looking for guidance on whether the Bank’s recent hawkish tone remains intact and the likelihood of another rate hike in October.

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EURCAD strengthened in early trading as the loonie remained under pressure from widening U.S.-Canada yield spreads and a softer oil backdrop, after CAD posted its longest losing streak since May last week. Attention today will centre on BoC Governor Macklem’s speech on economic developments, which could influence expectations for further Canadian tightening, while ECB President Lagarde is also due to speak, although her scheduled remarks are not expected to focus heavily on monetary policy. With little major data on either side, central-bank guidance and oil prices should remain the main near-term drivers for the cross.

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EUR was steady in early trading, with geopolitical concerns in Europe and the Middle East limiting upside while the Fed’s hawkish stance continues to support the U.S. dollar. Political uncertainty in Germany has added another headwind after Chancellor Friedrich Merz’s CDU suffered a sharp setback in regional elections, raising questions over the government’s domestic support and its ability to push through economic reforms.  Meanwhile, expectations for further ECB tightening are providing some underlying support, with attention turning to President Lagarde’s speech later today and the Trump-Xi meeting later this week.

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GBPEUR was broadly unchanged in early trading, with the cross remaining range-bound as softer oil prices provide some support to the euro, while renewed political uncertainty in Germany limits upside; with no major UK catalyst today, attention is likely to remain on ECB President Lagarde’s remarks and broader European risk sentiment.

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GBP held steady, remaining near seven-week lows as markets continued to focus on relative interest-rate expectations and the recent pullback in energy prices. The Bank of England held rates last week but left the door open to further tightening if inflation pressures persist, with markets pricing roughly a 65% chance of a November hike. Stronger recent UK growth and retail sales data have offered some support, while this week’s PMI readings will provide the next important check on the domestic outlook.