The market opens with the USD showing modest strength, oil prices climbing over 1%, and both equities and bond yields trending higher. It’s a busy day on the economic calendar, featuring the release of Eurozone and UK PMI figures, the ECB’s rate decision along with its policy statement and press conference, Canadian retail sales data, and U.S. PMI indexes. President Trump, a vocal critic of Fed Chair Jerome Powell, will visit the central bank Thursday, escalating tensions with the Fed. The US State Department fired its top South China Sea experts and closed a key Indo-Pacific office this month, creating critical gaps in regional expertise. Columbia University has agreed to pay over $220 million to the federal government to restore research funding cut by the Trump administration over campus antisemitism concerns.
News Headlines. The EU and U.S. are nearing a trade deal that would set a flat 15% tariff on European imports, mirroring the recent U.S.–Japan agreement. President Xi urged EU leaders to "properly handle differences" as he criticized recent trade actions at a tense summit focused on trade and the Ukraine war. Chinese engines are secretly sent to a Russian state-owned drone maker, labeled as "refrigeration units" to evade Western sanctions, officials and documents reveal. A Thai F-16 struck targets in Cambodia as a border dispute escalated into clashes. For a second night, thousands of Ukrainians protested as President Zelenskyy vowed to submit a new bill to address concerns over a law seen as undermining anti-corruption agencies. A top Iranian official warned that European threats to reimpose sanctions could prompt Iran to leave a nuclear weapons pact.
In currency markets. The Japanese yen hit a two-week high on optimism about the new US-Japan trade deal. AUD/USD hit 0.6600, extending its four-day rally, boosted by upbeat trade sentiment after the US-Japan deal. The USD strengthened against Asian currencies, rising 0.2% against the JPY, 0.05% against the CNY, and 0.2% against the THB. Emerging market currencies followed suit, with the ZAR down 0.43% and the MXN slipping 0.12%.
In commodity markets. Crude ended a four day decline by rallying over 1% as market focus on a possible agreement of a US-EU trade agreement. Natural gas is up 0.63% on the day but remains over 12% down for the week. Gold and silver prices fell in domestic futures as the easing of U.S. tariff concerns boosted risk appetite. Agricultural commodities are mixed, with Soybeans and Wheat rising 0.37% and 0.77% respectively while lumber retraced 1%.
USD/CAD remains steady in early trading, though optimism from a new U.S. trade deal could boost the global outlook and support the Canadian Dollar.
EUR/CAD rebound as the news of a possible agreement between the EU and the USD circulates.
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 remains under mild pressure as the EUR post moderate gains but remains within the weekly range The possible trade deal between the US and EU could put pressure on the currency pair.
GBP/USD falls as July’s UK S&P PMI shows slower-than-expected business growth, with the Composite PMI at 51.0 versus forecasts of 51.9.
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