The Morning Update

The USD holds steady, oil prices weaken, equity markets are mixed, and US yields ease amid ongoing Middle East uncertainty and easing Fed rate expectations. The USD continues to be contained within a tight trading range, despite edging to a two-week high as the U.S.-Iran stalemate supports safe-haven demand. Softer U.S. inflation data has reduced expectations for a September Fed rate hike, with attention now turning to today’s U.S. PPI report for further direction. Global equity markets are mixed, with U.S. futures and European equity markets edging higher as softer U.S. inflation data reinforces expectations that the Federal Reserve will remain on hold in September. Technology shares remain supportive following strong AI-related earnings, while Asian markets were mixed overnight and continued uncertainty surrounding Iran tempers broader risk sentiment. Elsewhere, oil prices weaken as rising U.S. inventories and softer demand forecasts outweigh continued Hormuz supply concerns, while gold prices ease. Bitcoin firms as softer U.S. inflation reduces expectations for a September Fed rate hike. In focus today: Markets will be watching U.S. PPI inflation and weekly initial jobless claims, with the releases expected to provide fresh direction for currency markets.

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News Headlines. Anthropic investors bet on $2 trillion valuation in record IPO. Rhine drought exposes 34-year delay in tackling major German bottleneck. Ukraine attacks Russian grain export terminals in Black Sea, prompting warning about food markets. 'Hormuz remains blocked'; Iran disputes Trump claims as traffic sinks to near 3-month lows. Putin visits disputed island near Japan, drawing Tokyo's ire. Israel sends more troops to the West Bank village besieged by Jewish settlers. Canada and the US not yet ready to make tariff deal, Canada unsatisfied with the latest US offer.

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In currency markets. Against the U.S. dollar, the yen holds steady around 159.40 amid expectations that the Bank of Japan could raise rates as early as September or October. The Australian dollar also remains supported after the RBA reiterated that inflation risks remain tilted to the upside and further policy tightening may be required.

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In commodity markets. WTI -2.08% | Nat Gas -0.71% | Gold -0.50% | Silver -0.97% | Copper -0.53% | Palladium -1.99% | Coffee +0.06% | Cocoa -0.70% | Soybeans +0.13% | Wheat +0.30%

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CAD holds steady in early trading, with ongoing CUSMA concerns tempering sentiment while easing oil prices provide limited support. Markets are focused on U.S. PPI and initial jobless claims for near-term direction. The broader focus remains on Canada-U.S. trade negotiations ahead of fresh U.S. tariffs scheduled to take effect August 19, keeping trade uncertainty a key headwind for the Canadian dollar.

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EURCAD edges higher in early trading, ending a six-day losing streak as expectations for a September ECB rate hike support the euro. Meanwhile, softer oil prices and ongoing Canada-U.S. trade uncertainty are limiting support for the Canadian dollar, leaving the cross with a modest upside bias.

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EUR rebounds from a one-week low against the USD, holding above 1.1500 as expectations for an ECB rate hike in September provide support. However, elevated oil prices and geopolitical tensions are underpinning the U.S. dollar, with markets now focused on U.S. PPI and initial jobless claims for direction. More broadly, persistent energy-driven inflation has strengthened expectations for further ECB tightening, with a Reuters poll showing a strong majority of economists expecting a 25bp September hike.

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GBPEUR slips below 1.1700 in early trading as mixed UK data weighs on sterling, with Q2 growth of 0.4% offset by weaker industrial and manufacturing production. The euro remains supported by expectations for a 25bp ECB rate hike in September, giving it the relative advantage over the pound. Attention now shifts to Friday’s Eurozone GDP data for further direction.

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GBP is sidelined, trading flat in early trading as UK GDP growth of 0.4% was offset by weaker-than-expected industrial and manufacturing production. The mixed data highlights pressure from elevated energy costs, while reduced expectations for near-term Fed tightening are limiting U.S. dollar strength. The softer factory data also reinforces concerns that UK growth momentum could fade into the third quarter, leaving the Bank of England facing a difficult balance between slowing activity and persistent inflation pressures.

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