USD

The US Dollar is slightly higher this morning but still trading near a 15-month low. This comes after a tough stretch that saw the Dollar Index shed nearly 3.5% since last Thursday after inflation data indicated a slowdown in US consumer and producer inflation.

Despite this, markets still expect another 0.25% rate hike by the Fed on July 26. However, expectations for further increases this year have decreased significantly. In addition, news of the departure of the ever-hawkish James Bullard, who advocated aggressive tightening to tackle inflation, will only bring those expectations down further.

The preliminary read of the July Michigan Consumer Sentiment Index is coming up later today, which is expected to show an uptick to 65.5 after posting a 64.4 read in June.

EUR

The Euro is holding firm at a 16-month high today, following an impressive six-day rally driven by a widespread selloff in the Dollar.

Germany's latest wholesale price data showed a year-on-year decline for the third consecutive month, dropping 2.9% in June, the sharpest decline in three years. In addition, monthly wholesale prices contracted by 0.2% in June, the smallest decline in three months.

On the trade front, the Eurozone's trade deficit in May posted a significant year-on-year decrease, as imports dropped by 12.8% due to weakened domestic demand. Exports also declined by 2.3%, mainly driven by a 10% decline in sales of raw materials.

GBP

The Pound is marginally lower this morning but still trading near the April 2022 high as traders place bets on an even more hawkish BoE over the coming months while the Fed appears set to move toward the sidelines.

With the UK calendar bare-bones today, GBP traders will look ahead to next week's inflation data to better understand what the BoE may do for their August 3 interest rate decision.

While a hike of at least 0.25% is priced in, market pricing suggests a 55% chance of a 0.5% hike. Another stubbornly high inflation print next week will increase the odds of the Bank delivering a jumbo 0.5% hike next month.

JPY

The Yen is down today but still on pace for its best week since early-January, thanks to the Dollar's recent decline.

On the data front, Japan's industrial production fell in May, with a month-on-month decline of 2.2%. This was the first contraction since January and was primarily attributed to decreased output in key sectors such as motor vehicles. However, industrial production rebounded year-on-year, growing by 4.2% in May. This was a significant turnaround from the 0.7% decline recorded in May 2022 and the most substantial increase since September 2022.

CAD

After soaring to a 43-week high yesterday, the Loonie is on pace for its best week since late May, although it is modestly lower this morning as traders catch their breath in the aftermath of this week's USD sell-off.

This morning, Canadian manufacturing sales showed signs of strength, posting a notable 1.2% monthly increase in May, surpassing forecasts of a 0.8% increase. This robust growth, the largest since February, of 1.2%, was primarily driven by increased sales of chemical products, motor vehicles, and machinery, with sales in Alberta and Ontario leading the charge higher.

Loonie traders will now focus on next Tuesday's inflation data to gauge how the BoC may position itself moving forward from a rates perspective, such as whether they may raise rates by 0.25% or 0.5%.

MXN

The Mexican Peso begins to lose ground today, giving up all of yesterday's gains but still on pace for its strongest week in over a month as the MXN continues to lead the charge among major currencies this year.

The massive interest rate differential between Mexico and the US has played a big part in the Peso's impressive rally, attracting carry traders to the currency. This spread could remain wide for some time as Banxico remains satisfied with maintaining its current key rate while the Fed could finish its tightening cycle after this month.

After a mostly quiet week on Mexico's economic calendar, MXN traders brace for another uneventful stretch until next Thursday, when Mexican retail sales data is set to be released.

BRL

The Brazilian Real appears to be on its way to its first winning week against the Greenback in nearly a month, up 1.5% for the week despite giving up some ground this morning after the Brazilian retail sales data release.

In May, Brazil's retail sales declined by 1%, catching market participants off guard and posting a contraction for the first time in six months. The retail sector experienced significant decreases, particularly in textiles, apparel, and the supermarket sector. Retail sales also contracted by 1% year-on-year, marking the first decline in 10 months.

This miss will only fuel speculation that the Brazilian Central Bank will cut rates as soon as next month, especially given the recent progress on the inflation front.

CNY

The Yuan is trading at a four-week high and on track for its best weekly performance since February, benefiting from the recent decline in the Dollar and continued support from the PBoC in the form of stronger-than-expected CNY fixings in the onshore market.

Looking ahead to next week, China's Q2 GDP and June retail sales figures are due to be released on Sunday evening, followed by the much-anticipated PBoC interest rate decision on Wednesday.

Yuan traders will also watch next week's symposium hosted by Chinese financial regulators. The event aims to bolster foreign investor confidence and promote ongoing investments in China as Beijing seeks to address concerns arising from a weakening economic outlook and strained relations with the West.