Daily Market Pulse

USD

The US Dollar is inching higher this morning after initially trading lower through the European session.

Market moves have been relatively subdued thus far as traders await tomorrow's Fed decision and subsequent commentary.

Today's US calendar lacks any significant releases, although the latest Housing Price Index and consumer confidence data are set for release later this morning. Meanwhile, yesterday's PMI numbers revealed that the US private sector's growth had slowed in June. The services sector grew but at its slowest pace in five months, while the manufacturing PMI came in better than expected but still contracted for the eighth month out of the past nine.

EUR

After dropping 0.55% yesterday, the Euro is in decline again today after the latest German IFO index showed business sentiment falling more than expected.

Germany's business sentiment came in at 87.3 in July, below market expectations and the lowest read since November 2022. This marks the third month in a row of increasing pessimism surrounding the current economic situation, as well as future expectations, for Europe's largest economy.

Also crossing the wires this morning is the July Eurozone bank lending survey, which revealed that credit standards continued to tighten across all loan categories. This tightening was accompanied by a significant decline in loan demand from both firms and households, indicating that Europe continues to feel the pressure of the ECB's tighter monetary policy.

GBP

The Pound is trading sideways this morning and looking to snap a seven-day losing streak against the Greenback as GBP/USD remains near a two-week low.

On the data front, UK manufacturing optimism rose to the highest level in two years, indicating increasing positivity in the sector. Meanwhile, factory orders rose to their highest level since December.

With the recent string of negative data, and the UK's inflation rate remaining the highest among G7 countries, the BoE has a difficult decision to make for their August 3 meeting.

Market pricing indicates a 60% chance of a 0.25% hike and a 40% chance of a jumbo 0.5% hike.

JPY

After six consecutive losing sessions, the Japanese Yen closed yesterday in the green and continues to rise today as USD/JPY traders brace for the upcoming Fed and BoJ meetings. 

Since the Fed's expected 0.25% rate hike is already fully priced in, it is the BoJ that has the potential to surprise markets.

While the Bank is not expected to change its interest rate, there is more intrigue surrounding its stance on yield-curve control. There are mixed opinions amongst market participants as to whether the BoJ will tighten its monetary policy by amending its yield-curve controls, and it is this lack of consensus that typically leads to more volatile trading as the BoJ meeting gets closer.

CAD

The Loonie is pulling back nearly 0.2% today after yesterday's 0.4% rally against the Dollar to start the week.

The rally was aided by the 2.7% surge in oil prices that saw WTI trade to its highest level since April.

Oil's recent rally has been fueled by OPEC+ clamping down on supply, while news of fiscal stimulus on the way in China boosted the outlook for demand.

Meanwhile, after posting a 3.5% increase in May, Canadian manufacturing sales fell 2.1% in June, marking the most significant monthly drop since February. This marks the second-consecutive surprising miss following yesterday's 4.4% decline in wholesale sales.

MXN

The Mexican Peso is back in the red this morning after surging nearly 1% versus the Greenback yesterday thanks to a combination of higher oil prices and yesterday's inflation data out of Mexico that indicated price levels remain well above Banxico's target range, despite showing signs of improvement.

Earlier this morning, Mexico's economic activity index for May was flat monthly, missing market expectations of 0.4% growth. However, from a year-on-year perspective, the May figure impressed at 4.3% - well above the expected 3.6% rise.

MXN traders will now look ahead to tomorrow's Fed meeting for some fresh, forward guidance on US interest rates, as well as Thursday's unemployment rate release out of Mexico.

BRL

Like many of its LATAM counterparts, the Brazilian Real enjoyed an impressive against the Dollar yesterday, closing more than 1% higher on the day. Today, the Real is struggling to build on that success as markets digest this morning's consumer confidence and inflation numbers out of Brazil.

Brazil's Consumer Confidence Index climbed to 94.8 in July, the highest level since January 2019, fueled by improved future expectations and current sentiment. 

Meanwhile, the mid-month CPI report showed inflation slowing to 3.19% on an annual basis – better than the expected 3.26% and improving on last month's 3.4% read. On a monthly basis, inflation fell 0.07%, more than the expected 0.01% decline.

CNY

The Chinese Yuan is surging higher today thanks to the Politburo's pledge to increase fiscal policy support to help revive demand as China's economy continues to struggle post-COVID.

State media outlet Xinhua noted the government would focus on reviving demand for autos, electronics, and household products, as well as increasing household incomes to drive this demand. However, the announcement lacked any specific policy details or reference to timelines.

Also of note was the fact that the Politburo emphasized the importance of keeping the Yuan stable, echoing comments heard from the PBoC and other authorities and providing an additional boost for the Yuan.