Daily Market Pulse

USD

The US Dollar is clinging to modest gains this morning as traders dissect incoming economic headlines from across the globe, including fresh US jobs data.

According to the July Challenger Job Cuts report, US employers announced the fewest job cuts since August 2022. The Technology sector led to job cuts, followed by healthcare and education.

Meanwhile, initial jobless claims rose slightly to 227K last week, matching market expectations, while continuing claims rose to 1.7M but remained near a six-month low.

Later today, the July ISM Services PMI read is on the docket at 10:00 AM EST, and is expected to come in at 53, a slight decline from June but remaining in expansion territory for the seventh consecutive month.

EUR

Following yesterday's 0.4% decline against the Dollar, the Euro is slightly lower today following a wide range of European and US data releases throughout the morning.

Beginning in the services sector, the Eurozone Services PMI declined to 50.9 in July, the weakest in six months, as demand contracted for the first time in 2023, leading to a drop in new business and export orders. Germany's Services PMI fell to 52.3, a five-month low, while France's Services PMI dropped to 47.1, remaining in contraction. Spain and Italy also saw slower sector growth in July.

On the inflation front, producer prices in the Euro Area declined by 3.4% year-on-year, mainly due to lower energy prices, marking the steepest drop since June 2020.

Finally, Germany posted a €18.7B trade surplus in July, its largest since January 2021, as exports increased, particularly to EU countries, while imports declined.

GBP

The British Pound is down over 0.3% following the BoE's decision to raise interest rates by 0.25% earlier this morning. While the odds of a 0.5% rate hike increased over the past few days, the Bank elected for the smaller increase – in line with the consensus estimate. Six of the nine MPC members voted for a 0.25% increase, two voted for a 0.5% hike, and just one voted to keep rates unchanged.

After the decision, BoE Governor Andrew Bailey spoke with the media and mentioned he expects UK inflation to fall to 5% by October. However, he did not commit to future rate hikes, echoing the Fed and ECB on a data-driven approach.

Before the decision, July's UK Services PMI release showed slowing growth in the sector for the third consecutive month. Job creation slowed, while business confidence declined to its lowest level since January.

JPY

The Japanese Yen is up around 0.45% this morning after the latest data from Japan and the US. JPY is also getting some support from lingering market jitters following Fitch's surprise move to downgrade the US credit rate earlier this week.

Japan's composite PMI indicated the private sector expanded for the seventh consecutive month, primarily driven by the services sector as manufacturing challenges persisted. Japan's Services PMI came in at 53.8 in July, indicating the 11th successive month of sector growth. However, the lowest reading since January as new order growth cooled, employment declined, and overall confidence slipped to a five-month low. 

CAD

The Loonie is modestly lower heading into the North American session, primarily driven by moves in the Greenback following the latest US data releases.

Looking ahead, Canada's unemployment rate is expected to tick up to 5.5% in July, which would be the third consecutive month of an increase following the 5.4% print seen in June. Meanwhile, markets anticipate Canada to have added 21K jobs in July, less than June's surprising 59.9K. Both figures are scheduled for release tomorrow at 8:30 AM EST.

Also on the docket tomorrow is Canada's Ivey PMI for July, set for release at 10:00 AM EST.

MXN

The Mexican Peso is down over 1.2% this morning following losses in each of the previous three days against the Dollar as LATAM currencies struggle to find support amidst the latest round of broad market risk aversion brought on by the US credit rating downgrade.

Yesterday, Banxico board member Jonathan Heath crossed the wires stating his belief that the Bank's current benchmark rate is appropriate and there are no plans to raise it further unless conditions worsen. Heath noted that in the best-case scenario, Banxico might consider a slight rate cut by the end of 2023 if conditions improve.

BRL

The Brazilian Real is down over 1.2% this morning and nearly 3% on the week, following the rest of its LATAM peers lower. In addition to the broader risk-off sentiment across markets, the Real is feeling additional pressure from yesterday's surprise move from the BCB to cut rates more than expected.

The BCB elected to cut its Selic rate by 0.5% rather than the 0.25% expected, delivering its first rate cut since its tightening cycle began in 2021. In its accompanying policy statement, the committee members reaffirmed their dovish outlook on rates, stating, "If the scenario evolves as expected, the Committee members unanimously anticipate further reductions of the same magnitude" in subsequent meetings. 

CNY

The Chinese Yuan is in the green this morning following two days of losses versus the Greenback, although still in negative territory for the week.

Today's rebound comes on the heels of a surprisingly strong services PMI out of China, in which the July read rose to 54.1 against an expected 52.5. This marks the seventh consecutive month of expansion in the sector thanks to an uptick in new orders and job creation. Meanwhile, input cost inflation slowed to its lowest in five months, and sentiment fell to its lowest since December 2022.

Overall, July's composite PMI came in at 51.9, a six-month low, as the contraction in China's manufacturing sector weighed on the index.