Daily Market Pulse

USD

Stronger quarterly earnings from the likes of Alphabet and Microsoft have helped to lift risk assets overnight. The reversal came a day after a big selloff in First Republic Bank, with shares declining by almost 50%, driven by larger-than-expected deposit outflows fuelling investor uncertainty. Despite the rebound, markets remain skittish and volatile. The latest US data has been mixed, with strong gains amongst New Home Sales, offset by weaker Consumer Confidence. Today sees the release of the latest Durable Goods Orders, with the latest estimates predicting a 0.8% rebound over the past month. The dollar has consolidated overnight, with the dollar index (DXY) roughly 0.4% lower. 

EUR

The single currency has rallied overnight, driven by improving market sentiment. EUR/USD has risen by around 0.6% and remains close to its recent high. GBP/EUR remains depressed below 1.1300, highlighting broader Euro strength. The moves have been supported by recent comments from ECB officials, with both Philip Lane and Pierre Wunsch alluding to another hike at the next ECB meeting. Tomorrow’s regional Consumer Confidence data is the next key data point.  

GBP

The BoE’s chief economist, Huw Pill suggested that companies and households will need to accept that they are ‘poorer off’ amidst surging inflation and rising energy prices. Pill added that the BoE’s interest rate hikes over the past year were designed to cool spending power and that consumers should stop seeking pay rises. After a recent decline, GBP/USD has found some short-term support, rising by around 0.5% overnight. 

JPY

The Yen has been trending higher as we approach this week's key Japanese inflation and BoJ meeting. The rally looks more to do with broader market risk sentiment, or perhaps position squaring, given that markets do not expect any material changes by the BoJ. Furthermore, Tokyo's inflation has been forecast to moderate over the past month. As a result, USD/JPY has fallen by over 0.5% in the past two days. 

CAD

Having rallied by over 2% in two weeks, USD/CAD looks to be moderating. The move is probably more to do with the greenback wavering, given that oil prices remain depressed and no notable Canadian data releases have been released this week. This environment will likely persist, with the greenback driving directional bias for the pair.   

MXN

USD/MXN rallied over 0.4% yesterday as the pair snapped a four-day rally. The move was fueled by the latest growth data, highlighting the Mexican economy growing by 0.1% during February and 3.8% yearly. Both data points missed analyst estimates. The data has also helped to increase concerns that a US slowdown will impact the profile for Mexican manufacturing. 

BRL

While last week’s impressive dollar rally looks to have stalled, recent activity among USD/BRL suggests a consolidation phase. USD/BRL remains close to last week’s high. 

CNY

The strong rally in USD/CNY through yesterday has held firm overnight. The 0.6% rally was driven by concerns over the prospects for the Chinese economy going forward, despite strong Q1 growth, as manufacturing faltered.