USD

After seeing its five-day rally come to an end yesterday, the US Dollar Index is down for the second-straight day as markets brace for this afternoon's Fed decision and the ensuing press conference.  

With traders fully pricing in a 0.25% rate hike today, all eyes will be on Fed Chair Powell's 2:30 PM EST press conference as markets seek clarity on whether the Fed is still eyeing more rate hikes this year. It is worth noting that at their June meeting, the Fed indicated they expect two more rate hikes in 2023. However, since that meeting, inflation has continued to moderate. Does that change the Fed's calculation?

Meanwhile, US mortgage applications declined last week, with refinancing applications down 0.4% and home buying applications falling 2.5%.

EUR

The Euro is up around 0.15% this morning, heading into the North American session as EUR/USD looks for its first winning day in nearly two weeks. The following 24 hours could be eventful for the pair, with the Fed and ECB set to deliver their latest monetary policy decisions and outlook.

On the data front, household lending in the Eurozone slowed to the lowest rate since May 2016 due to reduced credit demand because of higher interest rates. Lending to companies also decelerated to the slowest pace since November 2021.

Meanwhile, France's consumer confidence held steady in July as consumers expressed slightly improved optimism about areas such as the standard of living and personal financial situation over the next 12 months. However, concerns about unemployment rose significantly.

GBP

The Pound is inching higher this morning, building off yesterday's 0.6% gain versus the Greenback as cable traders jockey for position ahead of the Fed.

Yesterday, the IMF upgraded its outlook for the UK economy, predicting it would avoid a recession this year and post a 0.4% growth rate. However, this expected growth rate was still the second slowest among G7 nations. Factors like falling energy prices and reduced post-Brexit uncertainty contributed to the upward revision of the outlook.

With little action on the UK economic calendar for the rest of the week, the Pound will likely take cues from the Dollar and broad market sentiment as investors mull over the various central bank decisions on deck over the next three days.

JPY

The Japanese Yen is in the green for the third-consecutive day as traders gear up for the Fed and BoJ decisions over the next 48 hours, as speculation continues to mount about the potential for the BoJ to deliver a hawkish surprise.

While the base case remains the Bank maintains the status quo this month, the options market has seen a spike in implied volatility on JPY call options, indicating increased demand to hedge against any hawkish BoJ actions that could boost the Yen.

Earlier today, Japan's coincident index reached its highest level since September 2022, showing positive signs of recovery after lifting COVID-19 restrictions. However, the leading economic index was revised lower, indicating a more cautious outlook for the future.

CAD

The Loonie enters the North American session down over 0.4% against the Dollar and has turned negative on the week despite an overall weaker Greenback ahead of this afternoon's Fed announcement. While some of the pullback could be traders repositioning ahead of the decision, much of the losses can also be attributed to the oil rally fizzling out, as WTI is down around 0.5% this morning.

The Canadian economic calendar is empty from a data perspective today, although the BoC will release the minutes from its latest monetary policy meetings at 1:30 PM EST.

Looking ahead to tomorrow, May's annualized average weekly earnings are on the docket. The April print came in at 2.9%, its best read since November 2022.

MXN

The Mexican Peso began the day in the red but has pushed into positive territory this morning as it looks to rebound from yesterday's 0.6% drop against the Dollar.

Yesterday, the IMF raised its 2023 growth forecast for Mexico to 2.6% due to the stronger economic results seen early in the year, including labor market strength and signs of improving inflation. However, concerns over the long-term impact of high-interest rates caused the IMF to slightly lower its 2024 growth forecast.

Looking ahead, MXN traders will look to tomorrow's unemployment data for June, as Mexico's unemployment rate is expected to have slightly ticked up to 3% after coming in at 2.9% in May.

BRL

The Brazilian Real is inching higher this morning versus the Greenback following yesterday's pullback as traders mull fresh data out of Brazil while awaiting word from the Fed later today.

Brazil's current account returned to a deficit in June after posting a surprising surplus in May. The June deficit of $0.843B surprised markets, given consensus expectations were for a $1B surplus.

Meanwhile, foreign direct investment in Brazil shockingly fell to its lowest level since December 2021, sinking to $1.88B in June versus expectations of $6.7B.

Producer price inflation is next on the Brazilian calendar, set for release tomorrow at 8:00 EST.

CNY

After surging nearly 0.7% yesterday in the offshore market, the Chinese Yuan is pulling back from a two-week high this morning as CNY traders look to the Fed to help gauge the future of US/China interest rate spreads. This morning's pullback comes despite another firmer-than-expected fix of the Yuan from the PBoC in the onshore market.

This evening, China will release its latest industrial profits data, where it is expected to remain in negative territory from a year-on-year perspective as the sector continues to struggle in the face of weaker demand both domestically and abroad.