Monday August 26th, 2024

The USD is flat, oil prices strengthen, equity markets are mixed, and US?yields ease as risk sentiment wanes. The USD holds near a nine-month low, while the JPY has its second-strongest day since January, and the US?yields ease as markets position for a Fed rate cut in September. Equity markets paused as increasing tensions in the Middle East offset the bullish sentiment following Fed Chair Powell's dovish comments on Friday. Fears of escalating conflict in the Middle East caused the USD easing to stall and oil prices to rally over 1% as safe-haven buying returned after Israel struck Hezbollah targets in Southern Lebanon. Elsewhere, the central bank kept rates on hold in China after easing 20 bps in July. Bitcoin weakened, while silver and gold prices gained on Middle East tensions, and Iron ore prices extended gains as inventories fell in China. The focus this week is Monday US?Durable goods. Tuesday, German GDP, US?Housing Price Index &?Consumer Confidence. Thursday, EU?Economic Sentiment Indicator, German CPI, CAD?Current Account Q2, US?GDP?&?Initial Jobless Claims. Friday German Retail Sales, EU?CPI. CAD?GDP, US?PCE, &?Michigan Consumer Sentiment. Intraday, the US?Durable Goods Orders, and the Nondefense Capital Goods orders ex Aircraft will help provide intraday direction to currency markets.

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In other news.?Russia launches a huge missile and drone attack on Ukraine. Big tech in China doubles AI spending despite US restrictions. Harris's election fundraising passes $500 million since replacing Biden. NASA turns to SpaceX to bring back stuck astronauts back to Earth. "Things will get worse' before they get better, UK?PM?Starmer says. Bank of England Governor Bailey says inflation risk is diminishing. Canadian government orders rail workers back on the job and imposes binding arbitration, but teamsters plan to appeal. China set to discuss Taiwan and Tariffs with visiting Biden aide. IBM to shut its China R&D in a move affecting 1,000 staff. Libyan rival government to stop oil output amid central bank row.

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In currency markets.?The USD retests August lows against the JPY, weakening 4% in August, and the USD has dropped almost 8.5% in the last quarter. China holds on to gains, while AUD?&?NZD ease off 2024 highs against the USD. Intraday, CNY is up 0.1%, while Asian currencies slip 0.1% on average against the USD. Trading currencies are mixed, with NOK tumbling 1%, SEK, NZD &?MXN weakening 0.45%, AUD easing 0.3%, ZAR down 0.15%, CHF?firming 0.2%, and JPY strengthening 0.3% against the USD.

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In commodity markets.?Oil &?Silver prices rallied by 1%, Natural Gas prices tumbled by 3.25%, Gold prices strengthened by 0.6%, Copper prices firmed by 0.2%, Wheat prices eased by 0.55%, and Soybean prices weakened by 0.8%.

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Current level USD Index?????????????????????????? 100.786?????????????? Up 0.1%

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CAD?holds onto gains, finding support from firmer oil and metal prices. The loonie rallied 2% month-to-date in August against the USD. Investors increasingly expect a 0.25% easing by the Fed in September but feel the USD may be oversold after tumbling 3.2% in August amid increasing tension in the Mideast. The loonie at current levels may provide a buying opportunity, with many economists expecting the BoC to cut by 0.25% at each of the three policy meetings it has left in 2024, starting with the next meeting scheduled for September 4th.

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Current level USDCAD????????????????????????????? 1.3500???????????????? Down 0.1%

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EURCAD?amid increasing Mideast tensions, which is helping to support the loonie amid safe-haven buying of oil and precious metals.

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Current level EURCAD?????????????????????????????? 1.5081???????????????? Down 0.2%

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EUR?held onto Friday's gains and found support from German IFO data ahead of the US?Durable Goods data. The euro struggled to gain traction as investors balanced positive domestic data and a cautious ECB against increasing tensions in the Mideast following the Israeli missile attack on Lebanon. Domestically, the Euro found support following EBC?Chief Economist Lane's comments on Sunday, where the chief economist cautioned that the bank's goal of getting inflation back to 2% is "not yet secure," and he said interest rates would need to stay restrictive for the time being. Intraday, the US?Durable Goods data will provide direction to markets.

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Current level EURUSD?????????????????????????????? 1.1171???????????????? Down 0.2%

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GBPEUR?extended gains through 1.1800, following the BoE Governor's comment that the UK could be set for a 'Soft Landing.’

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Current level GBPEUR?????????????? 1.1820 (.8460)????????????????? Up 0.2%

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GBP?stalls below 1.3200 as the USD attempts a recovery amid waning risk sentiment on Mideast tensions. The pound stalls in early trading, holding near 18-month highs as increasing Mideast tensions sour risk sentiment, providing some fresh support to the USD. On the weekend, Bank of England Governor Bailey said that inflation risk is diminishing, ?"This is consistent with a process of disinflation which is steady and more in keeping with a soft landing than a recession-induced process." Bailey added The UK?economy has proved more resilient this year than expected, and inflation expectations "appear to be anchored.". With the lack of key economic releases from the UK this week, the US?economic data releases will direct the pound.

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Current level GBPUSD?????????????????????????????? 1.3204???????????????? Flat