Daily Market Pulse

USD

After a bumpy Tuesday session that began in the red, the Dollar Index bounced off the lows and turned positive after the release of U.S. retail sales data gave investors confidence in the resilience of the U.S. consumer. The Greenback is up over 0.3% today after the latest U.S. housing and mortgage data crossed the wires.

U.S. mortgage applications rose by 1.1% last week, driven by a 7.3% spike in refinance applications, while home purchase applications fell 1.3%. The average interest rate for 30-year fixed-rate mortgages dropped to 6.87% from 7.07%.

On the housing front, U.S. housing starts fell 8% in June to 1.434 million, missing market expectations. Meanwhile, building permits declined by 3.7%, weighed down by a 12.8% fall in multi-segment permits.

EUR

Having closed each of the previous three sessions mostly unchanged, the Euro is slightly lower this morning as buyers and sellers battle for control following the release of this morning’s Eurozone inflation report.

In June, the Eurozone’s annual consumer price inflation fell to 5.5%, a 17-month low. Energy prices, which fell 5.6%, were the primary driver of the decline. However, the core rate ticked up to 5.5%, up from 5.3% in May, while services inflation rose to 5.4% from 5.0%. Finally, month-on-month CPI rose 0.3% in June after coming in flat in May.

Meanwhile, the Eurozone’s construction output rose slightly by 0.1% year-on-year in May, slower than the 0.4% seen in April due to a decline in building activity and a slowdown in civil engineering activity.

GBP

Sterling continues to retreat from the 15-month high posted last Thursday, down nearly 1% today after a softer-than-expected UK CPI print put the sellers firmly in the driver's seat.

The UK's consumer price inflation sank to 7.9%, a 15-month low, mainly attributed to a decline in fuel prices. The core rate also eased to 6.9% after posting a 31-year high in May. Additionally, transport prices decreased by 1.8% due to a significant slump in fuel costs. On the producer side, annualized PPI fell to 0.1% in June, the lowest since December 2020, fueled by substantial declines in petroleum and chemical product prices.

Before the inflation release, markets were pricing in a 60% chance of the Bank of England hiking rates by 0.5% in August. However, the softer print shifted pricing to show a 60% chance of a 0.25% hike instead, leading to today's selloff in the Pound.

 

JPY

After an impressive six-day rally that lasted until last Thursday, the Yen finds itself in the red for the fourth consecutive session, down nearly 0.7% against the dollar this morning as traders take in more dovish rhetoric from Bank of Japan Governor Kazuo Ueda.

Ueda's remarks at the G20 meeting affirmed that the Bank of Japan has no plans to announce any changes to monetary policy after its meeting next week. Japanese Finance Minister Shunichi Suzuki also voiced support for the Bank of Japan's monetary policy, citing global economic risks.

Meanwhile, on the data front, Japan's Reuters Tankan Index declined in June, the first decrease in six months, indicating worsening sentiment amongst manufacturers due to concerns about slowing exports.

CAD

The Loonie is inching lower today after the release of this morning's US housing and mortgage data. Today's move follows yesterday's 0.2% gain against the dollar, driven by solid Canadian inflation and housing data.

The Canadian economic calendar will be relatively quiet for the next few days until Friday's double-dose of retail sales and housing prices are scheduled to be released. In the meantime, USD/CAD will likely take cues from the US dollar, broad-market sentiment, and oil prices, which are back in the green today following yesterday's rebound.

MXN

Despite reaching a fresh 7.5-year high to start the day, the Mexican Peso finished in the red yesterday — its first losing session in nearly two weeks. Today, the Peso is mostly unchanged as Wall Street enters the fray.

Peso traders will be thrilled to finally have some fresh data to analyze tomorrow, with May's retail sales on the docket at 8:00 AM EST. Mexico's annualized retail sales are expected to come in at 3.5% in May, a slight decline from the 3.8% seen in April.

Meanwhile, the month-over-month figure is expected to slow significantly to 0.3% after posting a 1.5% rise in April.

BRL

The Brazilian Real is moderately higher today after posting back-to-back losing sessions to start the week, primarily driven by moves in the US dollar in the absence of significant Brazilian data on the calendar this week.

Despite the lack of enticing macro data, BRL traders are monitoring progress on the Brazilian government's plan to balance its budget by 2024. The latest reports indicate that Brazil's Finance Ministry intends to introduce new revenue-raising measures to eliminate the primary budget deficit, such as changes to how closed-end funds are taxed and revising federal income tax on state tax benefits. Additionally, comprehensive tax reforms are slated to be proposed later this year.

CNY

The Yuan is down over 0.5% against the Greenback this morning, on pace for its fourth consecutive losing day, despite recent support from the PBoC in the form of stronger onshore-market fixings. The Yuan has struggled to find its footing since the disappointing Q2 GDP release earlier this week.

All eyes are now on the PBoC, who are set to deliver their interest rate decision this evening at 9:15 PM EST.

While there is some speculation that the bank may deliver another 0.1% rate cut, the market consensus is that the PBoC will leave its key rate unchanged at 3.55%.