USD

Weaker US housing activity dominated the data calendar yesterday. Building permits and Housing Starts missed estimates, as the impact of higher rates diminishes consumer activity. Today’s (MBA) mortgage applications may follow a similar path. Markets will have one eye on incoming bank earnings, which have been somewhat mixed throughout this week. The dollar is also finding some practical support, aided by recent hawkish talk amongst Fed speakers. The dollar index (DXY) is around 0.5% higher since Friday. 

EUR

As expected, Regional European inflation eased over the past month while underlying inflation remains stubbornly high. Consumer inflation across Europe eased to 6.9% from 8.5% previously, driven mainly by a significant drop in energy costs. Persistently high core inflation remains a problem for the ECB, which should ensure they stay hawkish on future rate expectations. Having risen sharply of late, EUR/USD is currently around 0.5% lower this week. 

GBP

The cost of living in the UK rose by more than had been predicted, with inflation remaining in double digits. Headline inflation rose at an annual pace of 10.1% over the past month, down from 10.4% previously but above expectations of a 9.8% jump. Food price increases have been a particular problem. Core inflation remains at 6.2% on an annual basis. Despite an uncertain UK economic outlook, the news will give the BoE some concerns as they contemplate further rate hikes. The pound is relatively flat on the week. 

JPY

With BoJ officials continuing to maintain their easy monetary policy narrative, the Yen remains under pressure. USD/JPY has risen over 0.8% this week and is approaching levels not seen since the beginning of March. The latest Japanese inflation report is released tomorrow (Thursday) evening and is expected to moderate further. This may increase the downside pressure on the Yen. 

CAD

Canadian inflation slipped to its lowest level in almost two years. The key Core CPI reading dropped from 4.7 to 4.3% annually. That good news will boost the BoC, which recently decided to pause interest rate hikes to assess the cumulative impact on the Canadian economy. USD/CAD remained fairly rangebound but has risen by over 0.3% so far today. 

MXN

Preliminary figures suggest that the Mexican economy grew by 3.8% during March, compared with the same month a year ago. That figure is slightly higher than the previous month. Having failed to break below critical support on multiple occasions of late, USD/MXN is currently pushing higher. The pair has rallied by around 0.5% since the low, which will be a concern to the Peso bulls (USD/MXN bears). 

BRL

The dollar posted some worthy gains against the Real yesterday, with USD/BRL rising by over 1%. While that may not sound excessive, the move represents the dollar’s most substantial gains for over a month. Given the big surge in the Real over the past two weeks, the consolidation was perhaps expected and overdue. 

CNY

Stronger-than-expected growth in China has encouraged many analysts to revise their full-year targets. Some expect growth to exceed 6% throughout this year. The PboC will release its latest interest rate announcement overnight, with no expected changes. USD/CNY is threatening to break higher, with the pair rising by 0.6% today.