Daily Market Pulse

USD

US CPI drops by 1% to +5.0% YoY, 0.1% better than expectations. Month-over-month CPI also beat expectations, decreasing to +0.1% from the prior reading of 0.4%. The overall sentiment of this move is positive-risk as prices on the surface seem to be easing. However, many are pointing out the actual uptick of the YoY "Core CPI," which omits volatile #food and #energy, to +5.6% from the previous +5.5% reading. This afternoon's March Fed minutes could also increase market volatility. The dollar is relatively flat so far this week, but given event risk, this is unlikely to be the case by today's close.

EUR

In the face of such crucial data later today, EUR/USD is edging higher, albeit at a leisurely pace. Markets will have to wait until tomorrow for the next big event in Europe, which is the latest German inflation report. With this in mind, we would expect the single currency to take its lead from the response to US inflation and Fed minutes. Therefore, if there is a positive reaction to risk assets, expect EUR/USD to challenge the recent high and vice-versa. 

GBP

The IMF released their latest projections for global growth yesterday, with the UK remaining anchored to the bottom of their growth charts for both G7 and G20 nations. Their latest estimates now predict a 0.3% reduction in overall GDP through this year. However, that decline has been reduced considerably from -0.6% in their previous update, given the UK’s more robust economic performance over the past six months. The pound has largely ignored the IMF report, with GBP/USD trading reasonably flat ahead of today’s critical US data. 

JPY

EUR/JPY surged to a four-month high earlier today, with USD/JPY also tapping levels not seen in a month. Much of the weakness amongst the Yen has been derived from a dovish-sounding BoJ. Indeed, new governor Ueda suggested (on Monday) that it was ‘appropriate’ for the BoJ to maintain their YCC policy. Given that no major Japanese data releases are scheduled for release this week, we would expect the Yen to take its lead from broader risk sentiment. 

CAD

At their latest meeting today, markets fully expect the Bank of Canada (BoC) to maintain Canadian rates at 4.5%. Economic data has remained robust in Canada, with recent beats on Employment and Retail Sales. However, inflation data has recently softened. Overall, the BoC seems intent on assessing the impact of their cumulative hikes on the economy before deciding on their next move. USD/CAD is roughly 0.4% lower this week, aided by higher oil prices. 

MXN

While USD/MXN has remained flat since the beginning of the week, the Peso bulls (USD/MXN bears) stay in control as the pair meanders near the recent low. Moving forward, USD/MXN will likely take its directional bias from the US inflation report, with the Peso set to rally on weaker news. 

BRL

USD/BRL moved around 0.75% lower yesterday as the Real continues to grind ever higher. The pair have now decreased to levels not witnessed since the end of January.