Daily Market Pulse

USD

Given stronger March payroll data, recent market pricing has shifted in favor of a 25bps rate hike from the Fed next month. However, the metric remains highly fluid and subject to wild price swings. This week’s US inflation report remains essential, given the stickiness of core inflation. However, markets remain split on whether inflation or incoming US bank earnings will be the more significant driver to broader investor sentiment. The dollar rebounded during the holiday-thinned market but is currently trending lower as normal levels of liquidity return.

EUR

The latest Regional Retail Sales declined by 3% annually through March, slightly better than the -3.5% decline estimated. At the same time, the latest Sentix Investor Confidence also beat estimates, improving from -11.1 to -8.7. Markets had been expecting a -10 print. The positive beats on data have helped the single currency rebound after consolidating during the holiday-thinned market. EUR/USD has risen by over 0.5% during the Asian and European morning sessions. Thursday’s German inflation data is the one to watch for the single currency later in the week, having unexpectedly accelerated during February. 

GBP

Like the single currency, the pound has rebounded this morning, having previously consolidated gains over the past few days. GBP/USD is roughly 0.5% higher, despite remaining below the 1.2500 region that has capped upside swings of late. GBP/EUR remains chained to the 1.1400 zone and lacks directional bias. On the data front, Friday’s UK growth data will be keenly monitored, given recent upside beats. Furthermore, BoE governor Bailey will be making several keynote speeches throughout the week, which also have the potential to impact the pound. 

JPY

While this week lacks keynote Japanese economic data releases, markets will pay close attention to comments from the BoJ’s incoming governor Kazuo Ueda. So far, he seems content to continue with the BoJ’s long-standing ultra-loose monetary policy. However, yields on key Japanese government bonds (JGBs) have steadily increased. That could put increasing pressure on the BoJ’s ongoing approach to maintaining the ceiling on the 10-year JGB at 0.5%. USD/JPY and EUR/JPY have also been creeping higher this week, which may reflect the recent rally amongst risk assets.

CAD

Tomorrow’s Bank of Canada (BoC) meeting is expected to conclude with the BoC keeping their key policy rate unchanged at 4.5%. This comes despite more substantial recent economic data releases out of Canada. Last week’s employment data continued with that trend, with unemployment remaining at a respectable 5% and a healthy 34.7k new positions added over the past month. USD/CAD has edged slightly lower today after finishing last week fairly flat. 

MXN

USD/MXN rallied by around 0.45% through last week, but most of that move has already been unwound. Looking ahead, high interest rates and a stable political backdrop have helped to drive flows into Mexico. That environment is expected to continue, which should ensure that the Peso remains attractive. 

BRL

With such a substantial decline through last week, as USD/BRL slipped by over 3.35%, some consolidation could help the dollar recover. The overall trend remains bullish for the Real, which could hamper any upside objectives for dollar bulls.