The USD eases, oil prices fall, equity markets are mixed, and US yields rise amid efforts to secure a peace deal in Ukraine. The USD holds steady as investors assess the White House meeting with leaders from the EU and Ukraine, and caution ahead of policy cues from the annual Federal Reserve symposium later this week. Asian markets are down, and US futures drifted lower as earnings from major retailers kick off today. European markets rose as signs of progress toward a peace settlement for Ukraine lifted market sentiment. Investors are turning their attention to Home Depot earnings today, followed by Target and Walmart later in the week, for clues on the impact of US tariffs. Elsewhere, oil prices weaken as the prospects of easing sanctions rise with the Ukraine peace talks. Bitcoin fell 0.75% to $115,000, while gold and silver prices firmed in early trading. Today, the focus is on the BoC CPI, US Building Permits, Housing Starts, and Fed's Bowman speech, which will help guide currency markets intraday.
In the news. Trump says the US will coordinate Ukraine's security with its European partners. The UK has 'agreed to drop' demand for access to Apple user data, says the US. Intel is getting a $2 billion investment from SoftBank. China and India seek to repair strained ties ahead of Modi-Xi meeting. ONS delays release of July retail sales due to 'quality' concerns. S&P affirms US credit rating as Trump tariffs boost government revenues. The UK's post-pandemic GDP recovery has been revised upward by the statistics office. Air Canada, flight attendants' union reach tentative deal to end strike. Carney's chief rival to return to Parliament after winning a new seat. Home Depot maintains full-year forecast even as it misses on earnings for a second straight quarter.
In currency markets. Currency markets are stable, gradually moving higher, as investors remain on the sidelines ahead of this week's Jackson Hole symposium, which starts on Wednesday and concludes with Fed Chair Powell's speech on Friday. CNY and Asian currencies, on average, are up 0.1% against the USD. Trading currencies are mostly up, with MXN & NZD, CZK & ZAR flat, JPY, NOK, & DKK firm 0.15%, SEK & CHF strengthened by 0.3% against the USD.
In commodity markets. Oil prices tumbled 1%. Natural Gas prices weakened by 0.75%. Gold & Silver prices firmed by 0.25%. Copper & Soybean prices are flat, and Wheat prices fell by 0.5%.
CAD holds on the sidelines, straddling 1.3800 despite weakening oil prices, as investors await the critical Canadian inflation report, which is expected to ease to 1.7% from 1.9% in June. Despite indications that pricing pressure is easing, analysts are still concerned about the longer-term impact of US tariffs on domestic inflation levels. The Bank of Canada kept interest rates unchanged at 2.75% at its July 30 meeting, with the Governor saying the bank's decision to hold rates steady was influenced by fresh signs of stickiness in underlying inflation. If we see easing inflation levels for July, coupled with the possible easing of rates by the Fed, this could add pressure on the Bank of Canada to cut by 25 bps at its September meeting.
EURCAD firms with the euro retesting multi-year highs as investors increasingly favour the single currency over the loonie following the EU/US trade deal and the expectations that the ECB will keep rates on hold in H2 2025.
EUR extends gains, retesting 1.1700 on the back of a softening USD and improved risk sentiment amid optimism for peace in Ukraine. The euro finds its footing again as investor sentiment improved following the EU and Ukraine talks at the White House on Monday. Investor caution ahead of the Jackson Hole symposium and the Fed Minutes on Wednesday, putting additional pressure on the USD. With the lack of high-tier US data releases today, we expect the euro to extend gains towards 1.1750.
GBPEUR holds steady as investors keep pressure on the USD, leaving the euro-UK pair sidelined.
GBP nudges higher, while investors remain cautious ahead of Wednesday's UK inflation report. The pound edges higher amid a softening USD heading into the Fed minutes and the start of the Federal Reserve's three-day symposium. Investors are expected to be sidelined ahead of Wednesday's key UK inflation report, which is anticipated to show UK inflation rates remain sticky at 3.7%. "What we're going to look at in the UK is really the labour market, which is kind of telling you that the BoE has room to cut. The second thing we'll watch in the UK is inflation, which kind of tells you that the BoE should not cut," said Samy Charr at Lombard Odier.
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