Daily Market Pulse

The USD (by BBDXY measure) rose 0.3% yesterday, posting gains against all its G10 counterparts as weakness in risk assets drove haven demand. Trading volumes were light overnight, and the USD enters today’s North American session largely unchanged to yesterday’s close as market participants await tomorrow’s high impact US CPI release for fresh information as is relates to potential peak US rates.

The EUR/USD fell 0.2% yesterday, in-line with other G10 counterparts. The ECB’s Governing Council member Villeroy spoke yesterday, stating “We will cut interest rates this year when the inflation outlook is anchored at 2% firmly — in terms of actual data — and durably, in forward-looking data,” adding “Our decisions will not be guided by a calendar, but by data.”

Banco de Portugal Governor Centeno indicated that the ECB could begin cutting rates in H1’24, saying it’s unnecessary to wait until data are in on wage bargaining to make decisions. Early this morning, European Central Bank Vice President Luis de Guindos stated “Soft indicators point to an economic contraction in December too, confirming the possibility of a technical recession in the second half of 2023,” while also noting that the strong retreat in inflation seen last year is likely to be less pronounced in 2024.

The GBP/USD fell 0.3% yesterday amidst a bid USD and a report that the domestic holiday spending season saw disappointing sales volumes. The British Pound is seeing some relative outperformance vs its G10 counterparts today, up 0.15% versus the USD. BOE Governor Bailey testifies to Parliament later this morning, and the next domestic trade releases come Friday in industrial production and trade balance data.

The Canadian Dollar would drop over 0.35% yesterday after the domestic trade data release unexpectedly fell from 14-month highs last month, with moderately higher crude pricing doing little to support the CAD. The USD/CAD enters today’s session largely unchanged to yesterday’s close, having weakened moderately in the overnight sessions. Investors will eye the next major domestic releases in the BOC outlook surveys on Monday, and the latest inflation data coming Tuesday.

The JPY is a relative outperformer in the G10 space, falling 0.2% yesterday and another 0.5% through today’s trading sessions after labour wage data slowed sharply. This print, when taken with softer recent economic data out of Japan, continues to build expectations that the BOJ will delay its monetary policy normalization.

USD/MXN is holding yesterday’s 0.8% rise today, while USD/BRL’s gain of 0.5% yesterday has nearly reversed the move today.