The Morning Update

The USD holds steady, oil prices are flat, equity markets are up, and US yields ease after US jobs data eases recession fears. Currency markets are sidelined as investors await a fresh batch of data next week. Equity markets rebounded on the better-than-expected US Jobless Claims on Thursday, which helped the S&P have its best daily advance since November 2022. Asian & European equities edged higher in early trading as risk sentiment improved after a volatile week, as investors await further US economic data to support stability in the US economy. Mixed signals at the Fed continue to concern investors after Fed Schmid indicated that he is not ready to support a reduction in interest rates with inflation remaining above the target. Elsewhere, China's consumer prices picked up more than expected in July, up by 0.5%. Oil prices are steady following yesterday's rally from ongoing Mideast tensions. Bitcoin extends gains, up 2%, approaching $61k, while gold and silver prices are flat. Intraday, we expect currency markets to consolidate after a volatile week and the lack of high-tier data releases from the US.

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In other news, China's Ningbo port reports an explosion on a container ship. Paramount Global announces it will cut 15% of its US workforce, and its shares rise on Q2 earnings. Cheaper mortgages are supporting demand, says UK housebuilder Bellway. Japanese PM canceled a trip over a major earthquake warning. US, Egypt, and Qatar in urgent push to secure Israel-Hamas ceasefire. Mexico's central bank cuts interest rates as the economy slows. China deflation fears ease as consumer prices rise. Steel and aluminum makers push PM Trudeau's government on China tariffs. US retailers rush holiday imports, fearing strikes and disruptions.

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In currency markets. After a volatile week, the USD steadies on better-than-expected Jobs data, and the JPY is heading for its first weekly drop in six weeks. The Chinese Yuan edges higher on a higher inflation report, and the Indian Rupee edges higher as exporters are advised to wait to hedge. CNY firms by 0.1%, while Asian currencies firmed by 0.2% on average against the USD. Trading currencies remain mixed, with ZAR stronger by 0.3%, AUD lower by 0.2%, JPY & SEK dipped 0.1%, NOK flat, NZD up 0.1%, and MXN & CHF firmed by 0.2% against the USD.

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In commodity markets, oil, gold, and silver prices are flat. Natural Gas and Wheat prices strengthened by 1.8%, Copper prices rallied by 2%, and Soybean prices firmed by 0.6%.

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CAD ends the week on a stronger note, rallying from a low of 1.3946 to a high of 1.3716 in early trading after its biggest trading partner, the US, eased recession fears on Thursday with stronger jobs data. Domestically, investors will be focused on today's Canadian unemployment rate, which is expected to increase to 6.5% in July from 6.4% in June. The CAD net change in employment is expected to rise, adding 22.5K from -1.4K in June. A weaker-than-expected jobs data today will further pressure the BoC to cut interest rates again at its September 4th meeting.

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EURCAD steadies at 1.5000 as investors are sidelined heading into the CAD unemployment data this morning.

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EUR continues trading within a tight range amid improving risk optimism amongst cautious investors. The euro is stagnating within a 1.0900-50 range amid a weaker USD and negative yields, which are being offset by US growth concerns and ongoing Middle East tensions. Domestically, Italian inflation levels held steady at 1.3%, French unemployment levels improved to 7.3% vs 7.5% in Q2, and the German inflation levels held steady at 2.6% y/y July. With the lack of any US high-tier economic releases today, we expect to see the euro hold within its current trading ranges today.

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GBPEUR steadies after a volatile week in which the pound tumbled nearly 2% against the euro after the Bank of England cut interest rates.

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GBP is flat in early trading, straddling 1.2750 after strengthening from overnight's weekly low of 1.2680. The pound remains down nearly 1% against the USD as markets are shifting their focus to next month's Fed interest rate decision. For guidance, investors will focus on next week's UK claimant count change on Tuesday and Wednesday's UK inflation report. Markets anticipate the BoE could cut interest rates again in September, following its surprise cut last week, which is expected to cap the pound's capability of rebounding against its peers.