The USD edges higher, oil prices continue to weaken, while equity markets and US yields are mixed as optimism for a US/Iran deal grows. The U.S. dollar is holding near a four-week high as investors assess the growing possibility of a Federal Reserve interest rate hike on Wednesday, despite easing oil prices and improving geopolitical sentiment. Global equities are mixed as an intensifying selloff in semiconductor shares weighs on Asian markets and Nasdaq futures, while investors rotate into defensive sectors and broader European shares edge higher. Lower oil prices are helping ease inflation concerns ahead of Wednesday’s Federal Reserve decision, although markets continue to price some risk of a rate hike as investors monitor developments surrounding the Strait of Hormuz. Elsewhere, oil, gold and bitcoin are weaker as easing U.S.-Iran tensions reduce geopolitical risk ahead of Wednesday's Federal Reserve decision. Fading supply concerns have pressured oil, while higher rate expectations weigh on gold and cryptocurrencies. Today sees a light economic calendar, with ADP Employment change and US Housing prices in focus, but expect markets to remain cautious ahead of Wednesday's key Fed Interest Rate Decision and Thursday's US GDP report.
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In currency markets. Against the USD, currency markets remain under pressure as investors continue to favour the greenback ahead of Wednesday's Federal Reserve decision, with expectations for a near-term rate hike remaining elevated. Attention now turns to U.S. second-quarter GDP and Core PCE inflation data later this week, while the Bank of England and Bank of Japan are both widely expected to leave interest rates unchanged, keeping the focus firmly on policy guidance and the outlook for global interest rates.
In commodity markets. WTI -1.84% | Nat Gas -0.40% | Gold -1.44% | Silver -2.35% | Copper -1.02% | Palladium -3.42% | Coffee +5.38% | Cocoa +1.39% | Soybeans -0.37% | Wheat -0.49%
CAD holds near a two-week low as sharply weaker oil prices weigh on the commodity-linked currency and investors await Wednesday's Federal Reserve decision. Attention will then shift to Friday's Canadian GDP report, which is expected to provide fresh insight into the strength of the domestic economy and the outlook for the loonie.
EURCAD comes under pressure, slipping toward the 1.6030 level as broad U.S. dollar strength weighs on the euro while the Canadian dollar finds relative support despite softer oil prices. Investors are looking ahead to Friday's Canadian GDP report and this week's Eurozone GDP and inflation data, which are expected to provide the next direction for the cross.
EUR remains under pressure near monthly lows as broad U.S. dollar strength and expectations of a hawkish Federal Reserve continue to weigh on the single currency ahead of Wednesday's policy decision. Investors are also focused on upcoming Eurozone inflation and GDP data later this week, which could provide fresh guidance on the European Central Bank's policy outlook.
GBPEUR eases toward three-week lows as the euro benefits from the ECB's relatively hawkish stance, while sterling remains under pressure ahead of Thursday's Bank of England decision. Investors are focused on Governor Bailey's guidance for clues on the UK's interest-rate outlook.
GBP slips against the U.S. dollar as broad greenback strength and cautious positioning ahead of Wednesday's Federal Reserve decision continue to weigh on sterling. Investors will also closely watch Thursday's Bank of England meeting, with particular focus on Governor Bailey's comments for clues on the timing of future rate moves and the central bank's assessment of inflation and the UK economic outlook.
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