The Morning Update

The USD slips, oil prices ease, equity markets and US yields are mixed ahead of the US growth report. The USD eases for a third consecutive day and is expected to remain cautious ahead of Friday's Core PCE report, today's US GDP report, and jobless claims, which will inform the Fed’s policy decision in September. Political uncertainty also lingers as Trump attempts to fire Fed Governor Cook, adding another layer of risk sentiment. Global equity markets recovered from an initial dip after Nvidia Corp.’s sales outlook fell short of high expectations, indicating that the momentum behind the record-breaking rally remains strong. “The market has been complacent in the number of Fed cuts it is pricing,” said Karen Georges, an equity fund manager at Ecofi. “If the job market shows more resilience than expected, investors might have to revise their rate cut expectations down.” Elsewhere, oil prices eased as concerns faded, and demand signals remain mixed. Bitcoin prices stabilized around $113,000, while gold and silver prices advanced in early trading. In focus today are the ECB Monetary Policy Meeting accounts, CAD Current Account Q2, US GDP, Initial Jobless Claims, PCE Prices, Pending Home Sales, and the Fed's Waller speech, which will help provide intraday direction to currency markets.

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In the news. Eurozone lending growth edges up to a new two-year high. NVIDIA's growth outlook is being impacted by uncertainty in China. EU Mission and UK Council in Kyiv hit in deadly Russian attack. France, Germany and the UK prepare to reimpose sanctions on Iran. Germany's cabinet approves voluntary military service for teenagers. UK long-term borrowing costs near highest levels since 1998. The US reaffirms Greenland's right to self-determination amid political sway allegations. All NATO members have met the old spending target; only three have met the new goal. Canada Post lashes out at CUPW after talks, calls union's latest demands 'unaffordable.'

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In currency markets. The USD steadies as September Fed rate cut expectations ramp up, with markets expecting an 89% chance of a 25bps cut next. The USD slipped to its lowest level against offshore CNH since November, and INR remains under pressure amid ongoing US tariff woes. CNY strengthens 0.3%, while Asian currencies, on average, remain flat against the USD. Trading currencies are mixed, with NOK & CZK down 0.1%, KWD, MXN, NZD, ZAR, and PLN are flat, JPY, CHF and AUD are up 0.1% against the USD.

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In commodity markets. Oil prices weakened by 0.6%. Natural Gas prices gained by 0.4%. Gold prices firmed by 0.2%. Copper prices slipped 0.15%, Wheat prices fell by 0.4%, and Soybean prices eased by 0.25%.

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CAD edges higher in thin trading, with investors remaining cautious ahead of the key US growth and jobs report scheduled for release today. The loonie is expected to trade cautiously ahead of Canada’s Current Account release, with direction likely driven by US GDP and initial jobless claims data. Stronger US figures could support the USD, while weaker data may offer the CAD some relief. Canada’s Q2 current account is expected to remain in deficit, reflecting weaker energy exports and softer global demand, though any upside surprise could lend short-term support to the CAD.

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EURCAD is expected to trade cautiously today, with direction driven by eurozone sentiment data and Canadian current account figures, while broader risk appetite and oil price moves remain key influences.

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EUR/USD is regaining momentum in Thursday’s European session, climbing back through 1.1650 amid a softer US dollar. Increasing expectations for a Fed rate cut are weighing on the US dollar, while hawkish commentary from the European Central Bank provides support for the euro's sentiment. Traders are now shifting their focus to the upcoming US GDP and Initial Jobless Claims reports, which are expected to provide intraday direction ahead of Friday's critical US inflation report.

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GBP/EUR is sidelined, with markets looking to the ECB's Monetary Policy Meeting Accounts for direction.

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GBP is trading sideways above 1.3500 against the US Dollar on Thursday as investors await the US Q2 GDP and Initial Jobless Claims for guidance. The cautious tone follows dovish remarks from Fed’s John Williams, who noted slowing GDP growth and an economic adjustment phase as reasons to consider rate cuts. However, he emphasized that more data are needed before any decision can be made. Meanwhile, BoE’s Mann favours keeping UK interest rates higher for longer, adding to the consolidation in GBP/USD.

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