Daily Market Pulse

EUR/USD

Overnight spot movement has remained rather subdued in the 0.35% range after the choppiness in yesterday’s session during Jerome Powell’s speech. While he sounded hawkish on the surface, the lack of major pushback to improving risk conditions and strong jobs data led the market to rally in risk assets. Nonetheless, we are essentially flat in EUR/USD over a 2-day period with little impetus for the remainder of the week to move the needle dramatically.

USD/CAD

Spot remains quiet overnight, only slightly higher than yesterday’s close. Bank of Canada Governor Macklem spoke yesterday, pushing his case for the pause in interest rates signaled at the last meeting. At 1:30 PM EST today, the BoC will publish minutes of their last policy meeting for the first time ever. The level of granularity in the document remains to be seen, but it may be market-moving, given the aforementioned pause. 

GBP/USD

Spot is 0.25% higher on the day, with no notable news out overnight. The market has been focused primarily on US rate policy. Today’s speeches from the Fed’s Williams, Cook, Barr, Bostic, Kashkari, and Waller should be the primary catalysts for any moves in spot during the North American session.

USD/BRL

Spot is about 0.25% higher this morning after yesterday’s 1% gain as President Lula Da Silva shows no signs of slowing down his criticisms of the BCB and its high rate policy, statements that he is making now on almost a daily basis. While lower rates would certainly be better for the country’s domestic markets, they would reduce the carry factor in USD/BRL, one of FX’s highest at the moment. In addition, such political interventionism in the central bank does not bode well for investor confidence in Brazilian assets as a whole.  

USD/MXN

Spot is marginally higher this morning after a strong performance lower yesterday before, during, and after Jerome Powell’s speech, closing the day 1.5% lower. The expected continuation of interest rate hikes during tomorrow’s Banxico decision is helping the MXN. Still, given their strong correlation to the Fed, there is a risk that they signal a slowdown in their rate path. The US and Canada are some of the largest, if not the largest, trade partners that Mexico has, and considering the BoC is pausing, and the Fed is on the cusp of pausing, it is hard to see Banxico following suit in the near future.