USD

The US Dollar selloff continued this morning after the release of softer-than-expected US inflation data, dragging the US Dollar Index down to a two-month low as markets anticipate that the Fed's rate hiking cycle will end sooner than expected.

The US annual inflation rate decelerated to 3.0% in June, the 12th consecutive month of decline and its lowest since March 2021. The softer print can be attributed to the notable impact caused by last year's surge in energy and food prices. Moreover, the core inflation rate, which excludes volatile items, dropped to 4.8%, the lowest reading since October 2021.

Meanwhile, US mortgage applications rose by 0.9% last week, with home purchase applications increasing and refinancing applications decreasing, while the average interest rate for 30-year fixed-rate mortgages reached an eight-month high.

EUR

The Euro is on pace to extend its four-day winning streak against the U.S. dollar on the heels of the latest U.S. inflation data, pushing EUR/USD another 0.5% higher today.

Earlier today, Spain also released its June inflation numbers, indicating the country experienced its lowest consumer price inflation since March 2021, coming in at 1.9%. Cooling prices for food, non-alcoholic beverages, housing, utilities, and transportation aided the slowdown. In addition, Spain's annual core inflation also slowed to a one-year low of 5.9%, while its EU-harmonized inflation dropped to 1.6%.

Looking ahead to tomorrow, markets will watch for the European Commission's latest economic growth forecasts, Eurozone industrial production data, and the ECB's latest monetary policy meeting accounts.

GBP

The Pound is higher again today, reaching a fresh 15-month high as GBP traders weigh this morning's US CPI and BoE Financial Stability reports.

According to the BoE's Financial Stability report, the UK's largest banks demonstrated their ability to withstand potential economic crises. The stress test, which was more stringent than the 2008 financial crisis, assessed the banks' capital adequacy and ability to cope with rising interest rates across most major economies.

Meanwhile, the bank also noted that although the UK's economy has been resilient to recent interest rate increases, the full impact of tighter monetary policy is yet to be seen. Concerns remain about the potential effects on households, businesses, and the financial sector, particularly regarding those with heavy mortgage and consumer credit exposure.

JPY

It has been a remarkable five-day stretch for the Yen, breaking through to a one-month high this morning before the US CPI release. Since the report, the yen has surged nearly 1% higher on the day as the dollar selloff continues.

Earlier, Japan's PPI report for June showed producer prices increased by 4.1% compared to the previous year, marking the sixth consecutive month of slowing inflation as the index fell to the lowest level since April 2021. Inflation slowed in areas such as transport equipment, food, and beverage while seeing prices drop for chemicals, petroleum, coal products, and more.

CAD

After beginning yesterday morning trading sideways, the Loonie finally broke through against the US dollar and finished the day up over 0.35%. Today, the Loonie is up around 0.4% in the aftermath of the US CPI report as traders brace for the upcoming BoC interest rate decision at 10:00 AM EST.

In the lead-up to the BoC decision, traders have been increasing their bets in favor of the Bank delivering another hike today, with markets now pricing in a 75% chance of a 0.25% rate increase being announced.

Following the interest rate decision, BoC Governor Tiff Macklem and his Senior Deputy Governor will take to the podium at 11:00 AM EST to deliver their statement and take questions from the press.

MXN

The Mexican Peso is in the green again today after posting gains against the US dollar in the previous three sessions. The latest move comes as markets analyze today's industrial output figures from Mexico and the US inflation print.

Mexico's industrial output soared in May, coming in at 3.9% year-on-year versus an expected rise of just 1.9%, marking the 19th consecutive increase. The mining, manufacturing, and energy sectors were key drivers of this surprise performance, with mining experiencing an especially notable acceleration to 5.1%. On a monthly basis, industrial output sustained its positive momentum with a 1% increase, its second consecutive month of growth.

BRL

After beginning yesterday's session on the decline, the Brazilian Real reversed course and closed the day up nearly 0.4% against the greenback amidst a broad selloff in the dollar. Today's US CPI release has kept the rally going, with BRL now up over 1% against the dollar this morning.

After yesterday's June inflation data showed annual inflation sinking to a nearly three-year low, market bets for an August rate cut soared, initially taking the Real lower. However, the recent tone from US Fed officials as well as positive signs of US inflation cooling, has led to expectations that the US rate hiking cycle is nearing a close and giving BRL bulls hope that the interest rate differential between the two nations will not narrow as much as previously expected.

CNY

The Yuan rally continues to gain momentum today, now up to a three-week high against the dollar as traders ditch the greenback across the board after a weaker-than-expected US inflation print. Meanwhile, the PBoC once again set a firmer midpoint rate, signaling that it will continue to do its part to prop up the Yuan, which has helped fuel the rally.

On the data front, CNY traders are awaiting the release of June trade figures out of China overnight. Markets expect exports to post a year-on-year decline of 9.5% after showing a 7.5% drop in May. In addition, imports are projected to show an annual decline of 4% compared to a 4.5% decline in May.