The Morning Update

The USD is steady, oil prices are firm, equity markets are up, and US yields rise ahead of the PCE report. The USD edged higher, while the JPY rallied after Mr Ishiba became the new Japanese PM. Equity markets advance, with bench markets in the US & Europe hitting records, while China's CSI 300 is set for its best weekly advance since 2008 following China's stimulus announcements. Investors will be focused on today's US PCE report, the Fed's preferred inflation indicator, as well as consumer sentiment, which may offer further clues on rates after the robust revised data on Thursday. Elsewhere, Bitcoin continues weekly gains, rallying over 1% in early trading. Oil prices are steady after two days of weakness following expectations that OPEC will increase supply. In focus today, US Core PCE, Personal Income & spending, Michigan Consumer sentiment index, UoM 5-year Consumer Inflation Expectation, and CAD GDP will help provide direction to currency markets.

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In other news. Thailand's pension fund earmarks $11.6 bln for global investment overhaul. Chinese stocks post the best week since 2008 after the stimulus blitz. Netanyahu says Israel 'shares' aims of US ceasefire proposal. Zelenskyy to meet Trump following Republican backlash over US trip. China's most advanced nuclear submarine sank in shipyard, says US. Hurricane Helene brings life-threatening storm surge to the US. Canada's benchmark stock index closes above 24,000 for the first time. Veteran Japan lawmaker Shigeru Ishiba to be the PM after 'final battle.' Putin draws a nuclear red line for the West.

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In currency markets. JPY rallies over 1.1% following the election of Ishiba as the new Japanese PM. CNY steadies following an active week of new stimulus announcements from the government. The USD steadies heading into today's critical US inflation report. CNY and Asian currencies, on average, are flat against the USD. Trading currencies are mixed, with NZD easing 0.2%, AUD & NOK down 0.1%, ZAR & SEK Flat, MXN & CHF firmed 0.25%, and JPY rallying 1.2% against the USD.

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In commodity markets. Oil & Soybean prices are up 0.3%. Natural Gas, Wheat, and Silver are down by 0.6%. Gold & Copper fell by 0.2%.

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CAD is flat in early trading, holding within a relatively tight range as commodity markets settle and risk-on sentiment remains following China's stimulus announcement. Canada is holding at key levels, with investors remaining cautious about advancing the loonie with the prospect of more BoC interest rate cuts and this week's announcement that Saudi Arabia may increase oil production. Today, investors will be focused on the US PCE report and the CAD GDP report to provide intraday direction. The CAD GPD is forecasted to show the economy grew 0.1% in M/M July, while the BoC said it wants to see growth pick up to absorb the economic slack.

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EURCAD is unchanged as markets are sidelined ahead of the key US PCE report.

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EUR edged above 1.1150 head of the US key inflation report. The euro recovered some early losses, but overall, the single currency appears heavy towards 1.1200 with increasing speculation of an ECB rate cut in October. Domestically, Spanish & French inflation levels both dropped to 1.5% from 2.3% and 2.2% respectively. The falling inflation levels in Spain & France have increased speculation that the ECB will cut rates by 25 bps in October. Intraday, the US inflation report will be the primary driver for currency markets.

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GBPEUR holds at 2024 highs, with the pound up 4% in 2024, and the pound is forecasted to maintain its gains with increasing expectations of diverging interest rates following French/Spanish falling inflation levels.

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GBP stalls below 1.3400 ahead of a flurry of US data releases. The pound holds steady below 1.3400 as the USD inches higher while market sentiment remains positive. The pound continues to find support from the Bank of England, with markets expecting the central bank will take a slower approach to easing interest rates than the Fed and ECB. With the absence of UK economic releases, investors will be focused on the US data releases to provide intraday direction.