USD

The Greenback is surging this morning on concerns stemming from the US banking sector and China's disappointing trade data.  

Moody's cut ratings for 10 small to mid-size US banks, including Bank of New York Mellon and State Street, while also hinting at possible downgrades for larger banks due to concerns about funding risks and lower profits. The agency noted that these concerns accompany their anticipation of a mild US recession in early 2024, which they expect to negatively impact asset quality, emphasizing the elevated risks surrounding commercial real estate portfolios for certain banks.

Meanwhile, the US NFIB Small Business Optimism Index increased for the third straight month, beating market expectations and reaching its highest since November last year. However, business owners remained concerned about inflation and challenges in hiring.

EUR

The Euro is on the decline today after a surprising announcement that the Italian government will levy a 40% windfall tax on banks, adding to this morning's overall risk-off market mood. 

The tax will be a one-off levy on banks' profits from higher interest rates in 2023, causing European banking shares to tumble. The Italian government reportedly will use the proceeds to help those facing higher living costs and now joins Spain and Hungary, who have already imposed similar taxes.

On the data front, Germany's annual inflation rate in July was confirmed at 6.2%, suggesting inflation is trending in the right direction but at a slower pace than the ECB would like.

GBP

The Pound is in the red this morning and trading near a one-month low as traders assess the latest UK consumer spending data alongside this morning's gloomy macro headlines from across the globe.

UK retail sales grew by 1.8% year-on-year in July, a sizeable drop-off from June's 4.2%, led by clothing and footwear sales declines. Non-food sales as a whole declined, while food and drinks sales rose but at their slowest pace in months. In addition, the shift back to in-store shopping following the pandemic contributed to decreased online spending.

Meanwhile, UK banks are also feeling the effects of the headlines from Italy and the US, with Barclays, Lloyds, and HSBC all losing ground today.

JPY

The Japanese Yen is on the back foot for the second-straight day as today's risk-off sentiment sends traders flocking toward the US Dollar, overshadowing a heavy slate of economic days out of Japan over the past 12 hours.

In June, Japan's annualized household spending fell by 4.2%, the fifth decrease this year, with most spending categories experiencing declines, except for a notable rebound in transport and communication expenditures.

Meanwhile, average cash earnings rose 2.3% year-on-year in June, reflecting ongoing nominal wage growth. However, real wages declined for the fifteenth straight month.

Shifting to the trade front, Japan's current account surplus grew in June, the fifth consecutive surplus, as exports slightly increased and imports dropped significantly.

CAD

The Loonie is down over 0.9% this morning and trading at a two-month low following the release of fresh Canadian trade data. At the same time, CAD traders are assessing the implications of the US banking sector concerns on its Canadian counterparts.

Canada's trade deficit rose to its highest level since November 2020, much more than markets expected, led by a 2.2% decrease in exports as 9 of the 11 export categories witnessed declines. On the other hand, imports decreased by 0.5%, mainly due to lower energy and pharmaceutical purchases.

In addition, dismal trade data out of China has sent oil prices reeling today, further weighing on the Loonie.

MXN

The Mexican Peso is down over 0.7% against the Greenback today as traders ditch riskier EM currencies in favor of the safe-haven Dollar. It has been a bumpy ride for MXN traders over the last week, seeing significant day-to-day moves leading to Thursday's Banxico decision.

Looking ahead to tomorrow, Mexico's July inflation read is set for release at 8:00 AM EST, and markets are projecting a 0.49% monthly rise in headline inflation – the highest since February. However, from an annual perspective, inflation is expected to cool to 4.79% following a 5.06% read in June.

BRL

The Brazilian Real is down for the second-consecutive session, taking cues from its EM counterparts as market sentiment sours.

On the data front, Brazil's vehicle production fell by 3.3% month-on-month due to recent assembly line stoppages. From an annual perspective, production has tumbled 16.4%.

Looking ahead, Brazil's latest retail sales report is on the docket tomorrow at 8:00 AM EST. June's retail sales are expected to rise 0.4% month-on-month, rebounding from May's 1% drop and posting the first monthly increase since March. Meanwhile, the annual figure is projected to come in at 0.35%, improving from the previous read's 1% decline.

CNY

The Chinese Yuan is down for the third day in a row and trading at its lowest level in nearly a month following weaker-than-expected trade data out of China that has rippled through global markets.

China's trade surplus in July shrank to $80.6B, down from $102.7B a year ago, as exports plummeted by 14.5%, the steepest drop in over three years, while imports fell by 12.4%, the most since January and the sixth decline posted this year. Exports to the US saw the most notable drop, falling by 23.1% year-on-year, while those to ASEAN and the EU also plunged by over 20% each.