Daily Market Pulse

USD

The US Dollar is holding steady this morning in what has been a reasonably quiet week shortened by the holiday. The Greenback is currently up around 0.2% on the week as US traders return from their Independence Day celebrations.

Today's headline event is the release of the latest FOMC minutes at 2:00 PM EST, where traders will look for more clues about the direction of US monetary policy for the rest of 2023.

Markets are currently pricing in over an 80% chance of a 0.25% rate hike at the Fed's July 26 meeting and just below a 20% chance of another at the September meeting.

Before the FOMC minutes, US factory orders data for May is set for release and is expected to show a monthly growth of 0.8%, which would be its best read in over a year.

EUR

The Euro is finding positive momentum this morning after dropping nearly 0.3% against the Dollar in trading thinned by the holiday yesterday. However, it got little help from this morning's data releases out of Europe.

The Eurozone Composite PMI saw an economic slowdown in June as factory output and services activity declined. New orders fell for the first time since January, and job creation slowed. Business sentiment and confidence were also at their lowest levels. In Germany, private sector activity expanded, but at a much slower pace than the previous three months, with a decline in manufacturing and weakening demand weighing on the index. In addition, France experienced a moderate contraction in private sector activity, with a downturn in services and manufacturing.

In May, there was a notable decline in Eurozone producer prices, with a 1.5% year-on-year decrease and a 1.9% monthly drop, primarily attributed to lower energy costs.

GBP

The Pound is inching down today as traders digest this morning's UK PMI data while trying to gauge the BOE's next move.

In June, the UK private sector experienced its slowest expansion since March, weighed down by another contraction in the manufacturing sector. However, the UK service sector managed to post its third-straight month of growth despite the negative impact of rising prices.

Despite some signs of weakness in the UK economy, inflation remains stubbornly high. For this reason, markets anticipate the BoE will remain hawkish for some time and may even elect to deliver another 0.5% rate hike when they reconvene in August. Although rising rates are generally bullish for a currency, the fear of collateral damage across the UK economy from aggressive tightening is weighing on the Pound.

JPY

The Yen has traded in a narrow range for nearly a week now as markets wait to see if and how Japanese officials will respond to any further weakening in the Yen.

Masato Kanda, Japan's leading currency official, recently revealed that he and other Japanese officials maintain regular communication with US Treasury Secretary Janet Yellen and other international peers to discuss currency-related issues and broader financial markets. This has fueled speculation that the Japanese government may intervene in the market to backstop the Yen.

On the data front, the au Jibun Bank Japan Composite PMI indicated the sixth consecutive month of private sector growth in June, albeit at its slowest pace since February.

CAD

The Loonie is underperforming against the Greenback today, down over 0.35% and erasing its gains from yesterday's holiday-thinned session.

The decline comes a day after the release of June's S&P Global Canada Manufacturing PMI, which showed Canadian manufacturing contracted for the third consecutive month due to mounting pressure from higher interest rates and overall economic uncertainty, which weighed on demand.

With the next BoC meeting just one week away, traders remain on the fence about the prospect of the Bank delivering another 0.25% hike this month, with market pricing indicating around a 55% chance of the BoC raising rates again at next week's meeting.

MXN

The Mexican Peso is retreating slightly this morning after breaking through to a fresh seven-year high yesterday, following upbeat manufacturing data out of Mexico earlier this week.

Mexican manufacturing expanded for the fifth consecutive month in June, with factory output growing at the highest rate in four years. The news was especially impressive given the gloomy manufacturing data from many of the world's largest economies this week.

Meanwhile, investment in Mexico increased by 6.1% year-on-year in April, the slowest growth rate since September, driven by a decline in residential buildings and a slowdown in machinery and equipment investment.

BRL

The Brazilian Real is falling again today, its third-straight day in the red as US traders return from holiday.

The declines come as traders digest yesterday's June inflation data out of São Paulo, which showed prices fell on a monthly basis for the first time in over three years. The result surprised markets as the consensus estimate was for a 0.15% rise in prices, fueling speculation of an August rate cut from Brazil's Central Bank.

In addition, Brazil's industrial production rose monthly by 0.3% in May thanks to growth in sectors like petroleum derivatives and auto vehicles. On a yearly basis, industrial production increased by 1.9%.

CNY

After posting three straight winning days, the Yuan is retreating again this morning, down nearly 0.4% against the Greenback ahead of the US trading session.

The Yuan's decline can be attributed to a disappointing Services PMI report, which indicated sluggish growth in China's service sector for June, primarily due to a decrease in new orders. Despite this, there were positive signs, such as continued employment growth for the fifth month in a row and an improvement in business sentiment after five months of decline.

Meanwhile, US-China trade tensions remain a focus for CNY traders after Beijing announced it would impose export controls on certain metals used in the semiconductor industry, citing national security concerns. The move comes as the US considers new restrictions on the export of high-tech microchips and chipmaking equipment to China.