Daily Market Pulse

USD

Fresh off its best daily performance since August 2, the US Dollar Index is on pace for its sixth consecutive winning week ahead of Fed Chair Jerome Powell’s Jackson Hole speech later this morning. Traders are keen to hear Powell’s commentary on inflation and interest rates as market pricing shows US rates are expected to remain higher for longer.

Also on the docket today is the final print of August’s Michigan Consumer Sentiment Index. The preliminary read came in at 71.2, just shy of the 71.6 mark seen in July, which was the highest read in nearly two years.

EUR

The Euro is slightly lower this morning and looks destined for its sixth straight weekly loss versus the Greenback ahead of today’s upcoming speeches from ECB President Christine Lagarde and Fed Chair Powell. Lagarde’s comments will be particularly interesting to Euro traders after this morning’s Reuters report suggested ECB policymakers are increasingly considering a pause in rate hikes due to concerns about the possibility of a recession.

On the data front, the German economy was confirmed to have stagnated in Q2, ending a year-long recession while posting a 0.2% contraction annually. Meanwhile, Germany’s Ifo Business Climate indicator came in at its lowest level since October 2022.

GBP

After falling nearly 1% yesterday, its worst single-day loss since July 27, the British Pound is inching higher this morning. However, despite the modest gains today, GBP/USD is still deep in the red for the week and on the cusp of its fifth weekly loss out of the past six.

Last night, the GfK Consumer Confidence indicator in the UK increased to -25, exceeding market forecasts, primarily attributed to a decrease in inflation. All survey elements improved, indicating heightened optimism among participants regarding their finances and the broader economy for the next 12 months.

JPY

The Japanese Yen is back in the red this morning following yesterday’s nearly 0.7% decline against the Dollar, putting JPY on track for a fourth-consecutive losing week. The latest moves in the Yen come as traders digest the latest inflation data out of Japan while bracing for comments from Fed Chair Powell later this morning.

Tokyo’s core consumer price index increased by 2.8% year-on-year in August, slightly below the expected 2.9% but still above the BOJ’s 2% target for the 15th consecutive month. 

Meanwhile, the headline figure fell to 2.9% from 3.2%, better than the 3% expected by markets and the lowest level since September 2022.

CAD

Following the latest Canadian wholesale sales report, the Loonie is trading sideways this morning. With less than a week to go in the month, the Loonie is down nearly 3% in August and on pace for its worst month since February.

This morning’s preliminary wholesale sales estimate indicated sales increased by 1.4% in July, bouncing back from June’s 2.8% decline, primarily driven by higher sales in the motor vehicle and building material sectors. The only subsector to experience a decline was machinery, equipment and supplies, which fell 1.9%

Later today, the Canadian government is set to release its budget balance for June, where it is expected to post a CAD 5.3B deficit.

MXN

The Mexican Peso is up over 0.3% this morning, rebounding from yesterday’s pullback against the Dollar and putting it on track for its best weekly performance in a month as it looks to retest the eight-year high.

Yesterday, Banxico released its latest meeting minutes, which showed policymakers continued to emphasize a cautious approach to monetary policy and are in no rush to begin cutting interest rates. While recognizing strong growth in the Mexican economy, officials remained wary of renewed inflationary pressures as domestic demand and production costs rise, increasing the likelihood that Banixco stands pat longer than most of its EM counterparts.

BRL

The Brazilian Real is slightly higher this morning and remains on pace for its first winning week in a month despite yesterday’s pullback.

On the data front, the BCB released Brazil’s latest current account data, which posted a $3.61B deficit for July, better than market forecasts but still the most significant deficit in five months. Still, on a year-on-year basis, the deficit narrowed by $1.68B, primarily due to a decreased services deficit and an increased goods surplus.

Looking ahead to next week, producer inflation and unemployment data headline the Brazilian economic calendar, with the former scheduled for Wednesday and the latter on Thursday.

CNY

After posting gains in the previous two days, the Chinese Yuan is back in the red this morning as markets gear up for Fed Chair Jerome Powell’s highly anticipated Jackson Hole speech. Despite this morning’s pullback, the Yuan is still clinging to gains for the week as the North American session begins.

Earlier today, Reuters reported the PBOC had instructed domestic banks to reduce their outward bond investments as part of its efforts to prop up the Yuan by sapping offshore liquidity to combat short-sellers and deter capital outflows.

Next week, China’s economic calendar is headlined by NBS PMIs on Wednesday, followed by the Caixin Manufacturing PMI on Thursday.