USD

The Dollar Index begins the week higher after suffering a 0.8% loss on Friday – its biggest single-day drop in nearly a month. Friday's sell-off in the Greenback was driven by a disappointing non-farm payrolls read that missed market expectations for the first time in more than a year, which scaled back bets on the Fed's ability to still hike rates twice more in 2023.

The next key release for the Dollar will be June's CPI report, set for release on Wednesday, and is expected to show headline annual inflation cooling to 3.1%, while core annual inflation is projected to slow to 5%.

EUR

The Euro is slightly lower this morning after posting a solid 0.5% gain against the Dollar last week, aided by the surprising miss in US non-farm payrolls on Friday. While the miss created doubts among traders about how many more hikes the Fed has in them, Europe's stubbornly high inflation gives Euro bulls hope that the ECB will stay hawkish longer than their US counterpart.

All eyes will be on tomorrow's release of the latest inflation data out of Germany, where markets anticipate that June's Harmonized CPI will remain at 6.8% year-on-year in June – matching the May read and indicating no improvement despite the ECB's aggressive tightening.

GBP

After a strong performance last week that saw the Pound gain over 1.1% against the Greenback, GBP/USD begins this week on the back foot – down over 0.4% this morning. Cable traders remain concerned about the cracks being seen in the UK economy as the BoE appears set to ratchet up the rate hikes in its battle with inflation.

The most significant event on the UK economic calendar this week is tomorrow's labor market data, where the 3-month unemployment rate is expected to remain at 3.8%. In comparison, average earnings (excluding bonuses) project to fall to 7.1% in May from April's 7.2% read.

JPY

The Yen is inching lower this morning after surging more than 1.5% higher last week, its best weekly performance since mid-March. The Yen's rally was partly driven by the broader sell-off in the Dollar but also partly due to increasing rhetoric from Japanese officials suggesting they would intervene to prevent a rapid depreciation in the Yen.

On the data front, Japan's current account surplus grew in May, marking the fourth consecutive month of surplus. This was driven by a rise in primary income and a decrease in the goods account deficit, although the services account gap widened, and there was an increased shortfall in secondary income.

CAD

The Loonie is slightly lower this morning on the heels of back-to-back weekly losses against the Greenback after reaching a nine-month high back on June 27.

Despite the recent pullback, a deeper dive into Friday's Canadian jobs data indicated that the labor market remained strong, adding the highest number of jobs since January despite a modest uptick in the unemployment rate. The report has boosted bets for another hike from the BoC this Wednesday, with markets currently pricing in a 65% chance of a 0.25% hike, which would take the benchmark rate to 5%.

Earlier today, building permits in Canada rose in May, posting a 10.5% monthly increase in total value. However, compared to the previous year, there was a 13.5% decline in overall permit value.

MXN

The Peso is trading sideways this morning ahead of a quiet stretch on Mexico's economic data front.

The Peso continues to trade near its highest level since November 2015 and remains one of the top-performing currencies in the world this year.

The only data point out of Mexico for MXN traders to mull this week will be industrial production data set for release on Wednesday. With this in mind, USD/MXN will likely beat to the drum of the US Dollar, especially after the release of US consumer and producer price inflation data on deck later this week.

BRL

The Brazilian Real opens this week in the green after dropping around 1.7% against the Greenback last week. The loss was BRL's worst weekly performance since mid-April as markets anticipate Brazil's Central Bank will begin cutting rates next month.

Tomorrow's IPCA inflation report for June is projected to show a slight 0.08% price decline, which would be the first price decline since September 2022. Meanwhile, the annual inflation rate is expected to slow to 3.2% from the 3.94% seen in the previous read. This result will only fuel rate cut expectations from BRL traders, who already are pricing in around 1.75% worth of cuts by the end of 2023.

CNY

The Yuan is down 0.2% this morning on the heels of disappointing inflation data out of China, giving back much of last week's 0.5% gains against the Dollar.

China's consumer prices remained unexpectedly flat in June, with non-food prices experiencing a notable decline. However, food prices increased by 2.3% year-on-year, despite a sharp drop in pork prices. Core consumer prices also showed a slower annual increase.

In addition, producer prices fell 5.4% in June compared to the previous year, marking the ninth consecutive month of deflation and the sharpest decline since December 2015. While markets anticipated PPI to fall, June's result was even worse than the 4.6% deflation expected by markets.