USD

US Producer price inflation (PPI) registered noteworthy declines over the past month. Headline annual inflation dropped to 2.7%, with core PPI now at 3.4%. That news helped to lift risk assets on the day. A 0.4% decline over the past month is expected from today’s key US Retail Sales data. If achieved, it will match a similar slowdown during February. The latest Michigan Consumer Sentiment index will be released shortly after, completing a busy week for US data. The release of key US Bank earnings, which start today, will likely dominate risk sentiment. In the meantime, the dollar continues its downward trend, with the dollar index (DXY) losing around 1.2% so far this week. As well as marking six consecutive weekly declines, the DXY is trading at its lowest point for over a year. 

EUR

Despite notable reductions in inflation data throughout Europe, the ECB is expected to remain hawkish ahead of its next policy meeting. That said, the magnitude of the ECB’s next rate hike may depend on the EU lending survey, according to the ECB’s Wunsch. The rapidly changing rate dynamics between Europe and the US are also helping to boost EUR/USD, which has recently surged to a yearly high.

GBP

Recent UK economic data may have missed expectations, but that has not stopped the resurgent pound. Even a less-than-hawkish BoE and signs of softening UK inflation cannot stop GBP/USD from rising to a multi-month top. GBP/USD has now rallied by over 0.7% over the week, with the larger rally lasting over six weeks. 

JPY

Positive risk sentiment is helping to fuel further Yen losses. New BoJ governor Ueda is adding to those declines, suggesting that the BoJ’s YCC policy is likely to be extended. This, despite surging Bond yields challenging the BoJ’s ongoing commitment. EUR/JPY has just broken to a new 2023 high, partly aided by the resurgent single currency. USD/JPY looks more rangebound, with both the dollar and Yen remaining defensive.  

CAD

The Loonie has had a strong week, with USD/CAD slipping by around 1.5% and seemingly en route to test the 2023 bottom. The pair has fallen by around 3% since the end of March. Ongoing increases in oil prices have been a big driver. The Loonie rally is all the more remarkable given the BoC’s recent decision to pause rate hikes amidst softening Canadian inflation. 

MXN

USD/MXN has declined by a modest 0.25% over the week and remains close to the recent low. Peso bulls may need to keep the champagne on ice, but we have been down at these levels on many occasions before. 

BRL

The Real is leading the charge among Emerging Market currencies, with USD/BRL falling by around 2.5% this week. However, that only tells half the story, given that the Real has risen by a mighty 6% (USD/BRL decline) since the middle of March.