USD

The recent trend of ongoing dollar strength partially reversed at the end of last week and has since consolidated further, given the quiet data calendar and holiday backdrop. The dollar index (DXY) slipped by 0.5% from the cycle top as a consequence. The latest US S&P Global PMI survey will take center stage later today as we rapidly approach those backward-looking FOMC minutes, which are set for release tomorrow. Given that the last FOMC meeting came before most of this recent trend of super-strong USD data was released, there is a chance that they could have a more downbeat look on the US economy, which could give markets a boost. 

 

EUR

The latest German PMI report was a mixed bag, with the overall composite moving strongly back over the key 50 threshold to 51.1 (from 49.9) and reflecting a further boost in the Services component to 51.3 (from 50.7, the key Manufacturing component showed a surprising contraction from 47.3 to 46.5. Markets had been hoping for a jump to 47.8. it was a similar picture for the broader regional data. EUR/USD continues to trend lower, slipping by another 0.25% so far today, although the pair remains well above the Friday low.

 

GBP

The good news for the UK keeps coming. This morning saw a clean sweep amongst the latest PMI data, with strong gains achieved amongst the Composite (up to 53 from 48.5), Manufacturing (up to 49.2 from 47), and Services (up to a whopping 53.3 from 48.7). The good news did not end here, with reports that the UK government has received an unexpected £30bn boost ahead of the March budget, with a surprise £5.4bn surplus during January alone. The improvement comes largely from bulging tax receipts. The pound has embraced the news, with both GBP/USD (up 0.5%) and GBP/EUR (up 0.75%) during this morning’s European session.

 

JPY

Whilst USD/JPY has remained fairly airborne over the past few days, recent gains have been limited as we remain below the key 135.00 psychological regions. Saying that, we have trended higher through the European session, with the pair climbing by around 0.3%, driven by the increasing US yield advantage, which continues to dominate over the BoJ’s expected imminent changes to YCC policy. 

 

CAD

It is a big, big day for Canada, with both the latest Inflation and Retail Sales data due. With headline and core inflation both expected to trend higher, coupled with an expected bounce in the latest Retail Sales, stronger Canadian data could mount further pressure on the BoC, given their recent commitment to pause rate hikes. Canadian CPI is softer than expected. YoY: + 5.9%, +6.1% expected, +6.3% prior MoM: +0.5%, +0.7% expected, -0.6% prior. While these misses are dovish on the surface, the complete about-face in the MoM number vs. last month is still worth some concern. USD/CAD is understandably on the fence ahead of the numbers.

 

MXN

USD/MXN slipped to a 5-year low (MXN high) at the end of last week, as flows into Mexico continue unabated, given the high interest rates and settled economic backdrop. The dollar has clawed back around 0.3% since, but the Peso still remains in a clear uptrend. 

BRL

 

USD/BRL slipped 1.5% on Friday, alongside broader declines amongst currencies against the greenback.

CNY

 

As expected, the PboC left Chinese rates unchanged, and USD/CNY is up around 0.4% today, closing in on the recent high for the pair.