USD

The Greenback is in the red again this morning but bouncing off the lows after the latest batch of U.S. retail sales data.

U.S. retail sales for June posted a modest 0.2% expansion, falling short of the anticipated 0.5% increase. While select sectors, notably miscellaneous stores and non-store retailers, exhibited growth, others, including gasoline stations and building materials, experienced contractions. However, despite the miss on the headline number, the core control group registered a substantial 0.6% increase, alleviating some of the disappointment.

Looking ahead, U.S. industrial production data is on deck later this morning and is expected to show flat for June after contracting 0.2% back in May.

EUR

After hitting a 17-month high earlier in the European session, the Euro is falling off the highs after the release of the latest U.S. retail sales print. At the same time, markets brace for tomorrow's European inflation read. The latest read of the Eurozone's Harmonized Index of Consumer Prices is expected to confirm June's annual inflation at 5.5%, with monthly inflation coming in at 0.3%.

Meanwhile, while a 0.25% rate hike is fully priced in for next week's ECB meeting, ECB policymaker Klaas Knot acknowledged the potential for subsequent rate hikes moving forward, although admitting there is still uncertainty on this considering some signs of stabilization in core inflation. Knot also maintained an optimistic outlook for attaining the 2% inflation target by 2024.

GBP

The Pound is clinging to its earlier gains as cable traders assess the incoming US retail sales data ahead of tomorrow's UK inflation release.

The UK's CPI for June is expected to show a slight decline in headline annual inflation from 8.7% in May to 8.2% in June, while core annual inflation is expected to remain steady at 7.1%. However, the focus remains on core inflation due to soaring food prices in the UK.

It is worth noting that the previous CPI print for May, which missed market expectations, likely pushed the BoE to take a more aggressive approach in the form of a 0.5% jumbo hike at its last meeting. As it stands now, market pricing indicates a 65% chance of another 0.5% rate hike from the BoE at its August 3 meeting.

JPY

The Yen is up over 0.3% heading into the U.S. session on the heels of the latest U.S. retail sales release as Japanese traders rejoin the fray after being off on holiday yesterday.

Earlier today, Japan's Tertiary Industry Index for May showed a 1.2% increase, improving on April's 0.9% rise and reaching its highest level since the pandemic.

Looking ahead, JPY traders will be keen to look at Japan's latest trade numbers, particularly exports, on Wednesday evening and updated inflation readings on Thursday evening as the clock ticks down towards next week's BOJ meeting.

CAD

The Loonie is falling this morning as USD/CAD traders analyze the influx of critical U.S. and Canadian data this morning.

Canada's annual inflation rate declined to 2.8% in June, below market expectations of 3%, primarily driven by the impact of the Russia-Ukraine war on global energy prices. Notable decreases included transportation costs, thanks to falling gasoline prices, while food inflation remained elevated at 8.3%. Meanwhile, the monthly inflation index posted a 0.1% increase.

In addition, Canadian producer prices decreased by 0.6% in June, driven by lower costs for metals and chemical products, marking the third straight month of deflation. On a yearly basis, PPI sank by 5.5%.

MXN

Despite dropping nearly 1% yesterday intraday, the Mexican Peso managed to climb back out and eke out a small gain against the Greenback despite much of its Latin American counterparts closing in the red. Today, the peso is slightly lower after initially breaking through this morning to a fresh high not seen since December 2015.

Meanwhile, oil prices rebounded this morning after two consecutive losing sessions, helping to support the peso. Oil prices initially took a hit yesterday after the release of weaker-than-expected macro data out of China sparked concerns about waning demand from the world's second-largest economy.

BRL

The Real was dealt a blow earlier this week after disappointing data from China, a major importer of Brazilian commodities such as iron, stoked fears of weakening exports in Brazil. After dropping over 0.3% yesterday, the Brazilian Real is down another 0.1% today after the latest U.S. retail sales numbers.

Also worth watching on the export front, Japan has imposed a temporary ban on chicken imports from Brazil's Santa Catarina state following a confirmed case of bird flu in a backyard chicken. This comes after Japan suspended poultry purchases from Espirito Santo state last month due to similar incidents. While cases of bird flu have been reported in Brazil, commercial farms have reportedly remained unaffected thus far.

CNY

The Yuan is in the red for the third straight session as traders continue to mull the latest batch of disappointing data out of China while awaiting further support from the People's Bank of China (PBoC) and the Chinese government.

From the PBoC's perspective, there is the potential for another small rate cut tomorrow evening when they announce their interest rate decision. However, markets are keener to see additional fiscal stimulus support, which is expected to be unveiled after the upcoming Politburo meeting.

It's not only the Yuan feeling the effects of the weaker economic data. The Shanghai Composite Index also closed in the red today, with all sectors seeing various levels of declines.