The Morning Update

^{The USD steadies, oil prices weaken, equity markets are mixed, and US yields rise heading into the Fed rate decision. The USD index edged higher in early trading as markets positioned for the Federal Reserve’s interest rate decision. Investors expect a 25bp cut, but focus is on the outlook, with many anticipating Chair Powell will strike a cautious tone and avoid committing to an aggressive easing path. Any suggestion that future cuts will be gradual or data-dependent could lend further support to the dollar, even as broader expectations remain tilted toward additional easing into 2026. Global equities were mixed today, with Asian markets easing while European stocks gained 0.2% to recover some of the previous session’s losses. U.S. futures were little changed, with the S&P 500 and Nasdaq 100 holding steady as investors remained cautious ahead of the Federal Reserve’s rate decision. Despite the quiet trade, global benchmarks continue to hover near record highs, underpinned by optimism around policy easing. Elsewhere,Oil prices steadied after recent gains linked to Russian supply disruptions, with traders cautious ahead of the Fed decision. Bitcoin holds above $116,600, while gold eased back from record highs as markets awaited central bank guidance. In focus today, the Fed and BoC interest rate decisions will drive direction to currency markets today.}

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In the news. China bans tech companies from buying Nvidia's AI. Foreign investors in US assets rush for protection against swings in the USD. Trump UK Visit, King Charles is hosting a day of pomp and ceremony at Windsor Castle. The US and China in a deal for app to keep operating in the US. EU firms brace for more shutdowns due to China rate earth controls despite summit promise. Bank of Canada likely to resume rate cuts as tariffs hit jobs markets. Air Canada says flight attendants union requested cancellation of mediation. Food prices drive British inflation to 3.8% in August, above the US and the eurozone. Europe turns to Ukrainian tech for 'drone wall' against Russia. Alibaba's shares jump after it lands a major customer for its AI chip.

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In currency markets. The dollar edged higher on Wednesday ahead of the Fed decision, with investors awaiting Chair Powell’s remarks after a widely expected 25 bp rate cut. The euro eased to $1.1838 after touching a four-year high on Tuesday, while markets weigh how dovish the Fed’s guidance will be as easing expectations stretch into 2026. The yen firmed to a one-month high at 146.22 per dollar ahead of the Bank of Japan meeting and Japan’s upcoming LDP leadership vote, which could shift sentiment on fiscal and monetary policy. The CNY is up 0.15%, while Asian currencies on average are flat against the USD. Trading currencies come under pressure, with JPY, MXN & KWD flat, CHF down 0.15%, AUD, CZK, PLN NZD, SEK, DKK & ZAR fell 0.3%, and NOK weakens by 0.75% against the USD.

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In commodity markets. Oil and Gold prices fell 0.7%. Natural Gas prices are up 0.25%. Silver prices tumbled 2.7%. Copper prices weakened by 1.8%, while Wheat prices are flat and Soybean prices eased by 0.3%.

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CAD steadied in early trading after hitting a two-week high at 1.3735 against a weaker U.S. dollar on Tuesday. Broad greenback losses and firmer oil prices supported the loonie, even as Canadian inflation rose only modestly to 1.9% in August, below expectations. Markets see this as reinforcing the case for the Bank of Canada to cut rates at today’s meeting, given ongoing domestic headwinds. Analysts noted that recent CAD gains are more a reflection of dollar weakness than strong fundamentals. Canadian bond yields eased across the curve, highlighting cautious sentiment ahead of the BoC decision.

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EURCAD is steady ahead of today’s Bank of Canada decision, where markets largely expect a rate cut, while attention also turns to upcoming ECB signals on growth and inflation. In the near term CAD may see volatility from BoC guidance, but longer-term expectations of ECB stability and euro strength keep the bias tilted toward higher EURCAD.

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EURUSD weakened in early trading, holding near 1.1850 as the euro slipped against a firmer dollar. A cautious market mood is keeping traders on the sidelines ahead of the Federal Reserve’s policy announcement later today. Powell’s comments will be pivotal, with investors watching closely to see if he signals a measured approach to rate cuts rather than an aggressive easing cycle. A cautious tone could limit euro gains in the short term, even as longer-term sentiment toward the single currency remains supported by steadier Eurozone data.

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GBPEUR edged higher as steady UK inflation at 3.8% and resilient retail sales reinforced support for sterling. The data eased concerns about immediate Bank of England easing, giving the pound a relative advantage over the euro. Softer inflation dynamics in the Eurozone kept the single currency under pressure, leaving the bias tilted in favour of GBP.

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GBPUSD steadied near 1.3650 in European trading after UK inflation data for August matched expectations at 3.8%. The figures offered little immediate boost for sterling but underscored sticky price pressures that may keep the Bank of England cautious on easing. Markets expect the BoE to hold rates at 4% in tomorrow’s decision, with the outlook for future cuts hinging on inflation trends. Attention now turns to the Federal Reserve, where today’s policy outcome and Powell’s guidance will set the tone for the pair.