The Morning Update

The USD strengthens, oil prices ease, equity markets are mixed, and US yields rise due to concerns about the Fed and earnings. The USD index against its G20 peers, but ongoing concerns over the Federal Reserve's independence continue to linger, and could provide headwinds against further gains for the greenback. Equity markets are mixed ahead of Friday's key US inflation report, with caution ahead of Nvidia Corp's quarterly earnings, which will provide an update on the AI boom that has driven the equity markets again this year. "Nvidia's results transcend the company, becoming a barometer of macroeconomic activity, a talisman for the AI trade, and a critical pressure point for global geopolitics," wrote Kyle Rodda at Capital.com in Melbourne. Elsewhere, oil prices remain under pressure due to global supply concerns, while Bitcoin, Gold, and Silver are down. With the lack of any high-tier economic data releases, focus will remain on French politics, Nvidia's earnings and Fed updates to help provide direction to currency markets.

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In the news. US tariffs on India hit 50% as Trump-Modi ties sour. Denmark summons the top US diplomat over alleged covert operations in Greenland. Trump's battle against the Fed heads for a courtroom showdown. Musk's starship carries out a successful space mission after multiple failures. The EU is to propose removing US tariffs this week to meet Trump's demand. German consumer sentiment dips in September due to concerns about job losses, according to GfK. German lawmakers say Berlin could leave Franco-German jet project. A key Trump official says direct US government interventions could come next for the defence industry. Canada takes next step in submarine procurement project. UK producer price inflation rises to a two-year high in June. Canada Goose rises 7% in premarket trading after controlling shareholder gets take-private bids.

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In currency markets. Currency markets come under pressure across the board as the USD recovers its losses following Powell's dovish comments last week, as investors shift their focus to the critical US Inflation report on Friday for further guidance. CNY is down 0.1%, while Asian currencies fell 0.25% on average against the USD. Trading currencies come under fresh selling pressure, with NOK, CZK, and ZAR tumbling 0.5%. SEK, DKK, NZD, CHF, and AUD are weakened by 0.35%. JPY & MXN fall 0.3%, and KWD remains flat against the USD.

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In commodity markets. Oil and Silver prices eased 0.4%. Natural Gas prices firmed by 0.25%. Gold prices are flat. Copper prices weakened 0.75. Wheat prices fell 0.55% and Soybean prices up 0.15%.

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CAD continues under pressure, easing 1% in August as Fed-related political tensions and technical resistance supported the USD, while easing US-Canada trade tensions are having little impact on the loonie. Yesterday, Governor Macklem reaffirmed the BoC's 2% inflation target, stressed the need for flexibility to handle global shocks, and highlighted upcoming focus on supply shocks, core inflation measures, and housing affordability ahead of the 2026 framework review. Today, with the lack of market-moving economic data releases, we expect the loonie to hold within a tight trading band.

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EURCAD continues under selling pressure as the global risk-off mood has a greater impact on the euro, despite weakening oil prices pressuring the loonie. Technically, the longer-term signals continue to support a stronger euro against the loonie.

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EUR continues to fall under selling pressure, dropping below 1.1600 due to German data and ongoing political concerns. Today’s euro trading is pressured by escalating political instability in France—marked by a likely government collapse and surging bond yields—which undermines eurozone confidence, while deteriorating German consumer sentiment, hit by job-loss fears, adds further bearish weight to the euro. Weak German consumer sentiment: Germany’s GfK consumer sentiment index dropped further to –23.6 (from –21.7), driven by declining income expectations and concerns about unemployment—indicating slowing domestic demand and adding downward pressure on the broader strength of the euro.

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GBP/EUR exchange rate remains relatively stable, with the British pound showing modest gains against the euro.

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GBP drops below 1.3450 against a strengthening USD. The pound is gaining support following Bank of England policymaker Catherine Mann’s hawkish stance, which advocates for sustained high interest rates to combat persistent inflation. Meanwhile, the U.S. dollar could face downward pressure after President Trump’s dismissal of Fed Governor Lisa Cook, raising concerns about the Fed’s independence and boosting expectations of a dovish shift. Market participants are also closely watching upcoming U.S. GDP data and U.K. inflation and retail sales reports, as these could influence central bank policy expectations and further impact the direction of the GBP.

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