Daily Market Pulse

USD

It has been a volatile 24 hours for the Greenback.   Yesterday, the Dollar Index began the day in the red, but a less hawkish ECB combined with a stellar US GDP print helped turn the tide and guide it to its biggest single-day gain since March. Today, the Dollar Index is inching lower as traders continue to analyze the shocking BoJ decision overnight and numerous US and European data releases this morning.

US core PCE prices rose by 0.2% month-on-month and 4.1% annually, the lowest since September 2021, while overall PCE prices increased by 0.2% month-on-month and 3% annually, the lowest since March 2021.

Later today, the latest UoM consumer sentiment and inflation expectations are scheduled for release at 10:00 AM EST.

EUR

After yesterday's 1% decline, its worst single-day performance since March, the Euro is pushing higher as Wall Street enters the fray. The latest moves come after several key European and US economic reports to cap off an action-packed week.

Beginning with Q2 GDP, Germany's economy stagnated and remained in recession after the two previous quarters of decline. In contrast, France's economy accelerated by 0.5%, while Spain's economy grew by 0.4%.  

Meanwhile, Germany's CPI cooled to 6.2% in July, while France's consumer inflation eased to its lowest level since February 2022. Finally, Spain's inflation unexpectedly accelerated for the first time since April.

GBP

The British Pound is rebounding 0.6% this morning following yesterday's steep 1.1% drop against the Dollar that sent GBP/USD to a two-week low.  

Yesterday's selloff was primarily driven by reactions to the less-hawkish stance the Fed and ECB took this week, prompting traders to scale back on bets for a 0.5% hike by the BoE next week. Market pricing indicates a 0.25% rate hike is the most likely outcome for the BoE's August 3 meeting, although traders still assign a 25% chance for a 0.5% jumbo hike.

Next on the UK calendar is a slate of minor data points on Monday, including housing prices and consumer credit reports.

JPY

The Japanese Yen has gone for a wild ride since yesterday morning, exacerbated by the BoJ's market-moving decision to loosen the reigns on its yield curve control policy. The initial reaction to the news was volatile, to say the least, with Yen swinging over 1% in both directions in a matter of hours. 

This morning, the Yen is down 0.3% against the Dollar as the North American session begins.

Before the BoJ announcement, Tokyo's Annual CPI came in at 3.2%, above market expectations of 2.8%, while core CPI also surprised to the upside, coming in at 3% versus the 2.9% projected by markets.

CAD

The Loonie continues to struggle for direction today, sitting around 0.05% higher this morning as it looks on pace to close the week, mostly unchanged for the second consecutive week. Today's moves have been driven by the double dose of US and Canadian data released this morning.

Canada's GDP growth for May was confirmed at 0.3%, aided by a rebound in service industries but dragged down by the mining, oil, and gas industries. Meanwhile, the preliminary June read points to a 0.2% contraction due to declines in the manufacturing and wholesale sectors.

Later today, CAD traders will keep an eye on the Canadian government's April budget balance after the March balance showed Ottawa posted its most significant deficit since the early days of the pandemic.

MXN

The Mexican Peso is up 1.2% on the day, breaking through to a fresh December 2015 high and trending towards a nearly 2% gain for the week as traders mull over the array of data out of the US and Mexico this week.

Up next on the calendar, Mexico is set to release its fiscal balance today, where it is expected to remain in a deficit. Monday's preliminary Q2 GDP report will follow this. Mexico's economy has shown impressive resilience as of late, posting six-consecutive quarters of growth despite Banxico's hawkish stance on interest rates.  

BRL

The Brazilian Real is up over 0.5% this morning as traders react to the incoming US and Brazilian economic data. With the move, the Real is up around 1.3% this week after trading through a fresh 13-month high today.

In June, Brazil's unemployment rate averaged 8%, falling below market expectations of 8.2% and at its lowest level since December 2022. The number of unemployed individuals decreased, while those employed increased and real earnings kept pace with the previous read.

In addition, wholesale inflation fell 0.72% in July, slightly more than the expected 0.71% drop, marking the fourth straight month of deflation.  

CNY

The Yuan is inching higher this morning in the offshore market following two consecutive days in the red and failing to hang on to the two-week high seen yesterday morning. Despite the bumpy ride, the Yuan remains on pace for a winning week against the Greenback as the PBoC continues to support the Yuan with its stronger onshore fixes.

As traders await the next steps on the recently promised economic support from Chinese authorities, China's Minister of Housing and Urban-Rural Development, Ni Hong, crossed the wire stating the necessity to help stimulate home buying in China with measures aimed at lowering mortgage rates and down payment ratios.