The Morning Update

The USD strengthens, oil prices firm, equity markets are up, and US yields gain with rates in focus. Euro weakens as weak data increases pressure for more ECB rate cuts, China cuts its short-term policy rate, and the USD recovers as investors focus on Fed speakers today. Equity markets cautiously advanced, with utilities, food, and telecoms supporting the indexes, while US futures are flat, with indexes hovering near record highs after the Fed's 50bps cut last week. Investors will be focused on Fed speeches today for fresh insight on the scope of further easing in 2024., and the Fed's preferred price metric, the US personal spending, released on Friday. Elsewhere, oil prices edge higher after having its biggest weekly advance in five months, while Bitcoin jumped a one-month high, and gold prices stalled near their record highs. In focus this week, Monday US Global Manufacturing & Services PMI, Feds Goolsbee, Kashkari,& Bostic speeches. Tuesday German IFO, Fed's Bowman, US Housing Pirce Index, US Consumer Confidence, & BoC Governor Macklem speech. Wednesday, US Home Sales Change. Thursday Swiss Nat. Bank Monetary Policy Decision. US GDP, Durables Goods, Initial Jobless gains, BoE Monetary Policy Report Hearings, Fed Chair's Speech, ECB President Lagard Speech. Friday, CAD GDP, US Core PCE, Michigan Consumer Sentiment Index & UoM 5-year Consumer Inflation Expectation will help guide currency markets this week.

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In other news. Israel steps up bombardment of Lebanon, while the US warns against full-scale war with Hizbollah. Western nations join forces to break China's grip on critical minerals. Germany's SPD holds off the far right in the Brandenburg election. UK Finance Minister rules out a return to austerity after gloomy rhetoric draws criticism. UK Business activity grows less than expected. HSBC hit by sixfold surge in Hong Kong property loan defaults. China stimulus hopes rise after the PBOC cuts rate. Harris shows momentum in two polls while swing states stay tight. Barclays adds to Canada's hiring spree with ex-Citi banker Ken Davis to lead its Western Canada operation.

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In currency markets. Euro weakens on disappointing PMI reading, increasing speculation of more ECB rate cuts. JPY rebounded after testing two-week lows against the USD after the BoJ left interest rates unchanged last week. CNY slips after the PBOC cut short-term interest rates. CNY slips by 0.1%, while Asian currencies ease by 0.2% on average against the USD. Trading currencies are mixed with SEK tumbling by 0.8%, NOK weakening by 0.5%, MXN falling 0.3%, CHF flat, ZAR, AUD & NZD up 0.15%, and JPY firms by 0.3% against the USD.

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In commodity markets. Oil prices firmed by 0.25%. Natural Gas prices rallied by 1.8%. Gold prices are flat. Silver prices tumbled by 2%. Copper prices weakened by 0.85%. Wheat and Soybean prices strengthened by 1.1%.

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CAD edges higher in early trading, despite a strengthening USD as the loonie finds support from higher oil prices on geopolitical concerns and support from Friday's stronger-than-expected retail sales data. Focus this week will be on Tuesday's BoC's Governor Macklem speech and Friday's GDP, which is expected to show modest growth in July. Governor Macklem's speech on Tuesday is expected to see the Governor maintain his dovish stanch with the prospect of possibly 1% more rate cuts in Q4. Intraday, with the absence of domestic economic data, investors will focus on Fed policymaker's comments and commodity prices to provide intraday direction to the loonie today.

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EURCAD weakens on disappointing German & Eurozone PMI increases expectation for more ECB rate cuts in Q4.

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EUR continues on the back foot, looking heavy and retesting 1.1100 following disappointing eurozone PMI data. The euro dropped aggressively in early trading on disappointing French, German, and Eurozone PMI data, which all weakened beyond expectations. Following the PMI results, the Euro dropped from 1.1150, and German yields also fell as the weaker-than-expected data concern that the eurozone economic recovery has hit a wall and has spurred on speculation of more aggressive ECB rate cuts in 2024. Intraday, the focus will be on a flurry of Fed speakers today with investors looking for signals of the Fed's policy direction in Q4.

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GBPEUR rallies to a fresh multi-year high following disappointing eurozone PMI data, which has increased the expectation of more ECB rate cuts in 2024.

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GBP eases off multi-year highs following disappointing UK PMI Data. The pound slipped off 30-month highs against the USD following disappointing UK PMI data and a strengthening USD. Domestically, the UK Composite, Services & Manufacturing PMI fell below expectations, but on a positive note, the data held above the key 50/bullish level. The BoE kept rates on hold last week, with the Governor saying that he is optimistic that interest rates will fall but needed more evidence of residual inflation pressure disappearing. Today, Fed speakers will help drive the intraday direction for the pound.