EUR/USD

Spot continues its multi-day drop down over 3% from the highs seen last Thursday, primarily due to greater USD strength leading up to Fed President Powell’s speech today at the Economic Club of Washington (12 pm EST). Hawkish comments by the ECB’s Villeroy and Nagel today have so far not been able to stop this move, but given how far spot has moved from the lows seen last September, such a retracement is not surprising.

USD/CAD

Overnight price action in spot has been somewhat choppy in a 0.45% range yet essentially unchanged versus yesterday's close. The Ivey Purchasing Managers Index released yesterday was much better than expected at 60.10 vs. 33.4 expectations, but this did little to move markets. Oil futures are about 3.75% off the lows seen yesterday, but this is also doing little to buoy the CAD, as it is still 9% off the highs seen in late January.

GBP/USD

Spot is 0.35% lower on the day and has been trading within a 0.8% overnight range. Friday will bring a release of 4Q 2022 GDP data with 0.4% YoY growth expected, down from 1.9% for the prior print. The question remains whether the UK will avoid a technical recession with this print and, if so, whether it manages to do the same at the next reading.

USD/BRL

Spot is about 1% higher on the day and 5% higher from last Thursday's lows. While minutes released from the last central bank policy meeting indicate a hawkish tone that traditionally would support the BRL, the recent politics surrounding President Lula da Silva’s disagreement on rate policy imply any hawkishness will be met with further Presidential hostility, thereby weakening the currency. One positive item is that a YoY inflation reading this morning came in slightly lower than expected at 3% vs 3.25% expectations. 

USD/MXN

Spot is about 0.25% lower on the day, 1% off the highs seen yesterday. The Peso remains a relatively stable currency, especially within LatAm, as 3m yields north of 11%, making it a great way to earn carry against the USD. All eyes remain on today’s speech from Jerome Powell and the Banxico rate decision on Thursday.