Daily Market Pulse

USD

It has been a quiet start to the week for the Dollar, which is slightly higher this morning as US markets reopen after yesterday's Juneteenth holiday. After last week's jam-packed calendar gave markets plenty to chew on, the Greenback has been subdued to start this week as traders take advantage of the relatively quiet US calendar to regroup and reassess.  

Earlier this morning, US housing starts unexpectedly surged by 21.7% in May, reaching the highest level since April 2022 and surpassing forecasts. In particular, single-family housing starts saw significant growth, rising 18.5% from the previous month.

Meanwhile, building permits also increased by 5.2% in May, reaching the highest level since October 2022, although overall housing activity was held back by continuous pressure from interest rates and inflation.

EUR

The Euro is inching lower this morning and looks to recoup some of yesterday's losses as traders asses this morning's data out of Europe. 

Germany's producer prices rose by 1% year-on-year in May, lower than market expectations and the slowest price rise since January 2021. This decline was primarily driven by a significant drop in energy prices, although prices for non-energy goods continued to rise. On a monthly basis, producer prices decreased by 1.4%, which was much more than the anticipated 0.7% drop.

Meanwhile, Eurozone construction output experienced a slight year-on-year increase of 0.2% in April, driven by a rebound in civil engineering works, while building activity contracted for a second consecutive month. 

GBP

The Pound is lower for the second-straight day this morning as traders prepare for tomorrow's UK CPI read and Thursday's BoE interest rate decision.

Expectations are for May's headline CPI to slow down to 8.4% year-on-year, while Core CPI is projected to remain at 6.8% annually. Additionally, the Retail Price Index is expected to come in at 11.2% year-on-year, slightly below the previous reading but still at its highest level in decades.

While a BoE rate increase on Thursday is almost unanimously expected, tomorrow's CPI data could determine how much of an increase the Bank will deliver. Currently, markets are pricing in around a 70% probability of a 0.25% rate hike and a 25% chance of a 0.50% hike.                      

JPY

The Japanese Yen is rebounding this morning, up nearly 0.3% against the Dollar heading into the US session. 

Japan's industrial output data was released overnight and indicated that production increased by 0.7% in April compared to March, continuing its growth trend for the third consecutive month under the new base year of 2020. This growth was supported by sectors such as machinery, electronic parts, transport equipment, and chemicals. However, industrial output declined by 0.7% in April compared to the previous year, marking the third consecutive month of year-on-year decline.

Up next, JPY traders will get a look at the BoJ's meeting minutes from last week's meeting in hopes of finding new insights into the Bank's outlook.                             

CAD

The Loonie is taking another small step back this morning as sellers step in to knock it off its recent nine-month high.

With no data on the Canadian calendar today, CAD traders will shift their focus to tomorrow's retail sales data from Canada, followed by the minutes from the most recent BoC meeting.

Retail sales are expected to show a monthly rise of 0.2% in April compared to March's decline of 1.4%, while the ex-autos figure is projected to show growth of 0.4% over the same period.

Meanwhile, oil prices have pulled back this morning and remain in the red for the week as black gold continues to struggle to find momentum after the OPEC+ cuts were announced earlier this month. 

MXN

The Peso is inching lower for the second-straight day, down over 0.2% against the Greenback this morning. 

The latest moves come despite the stronger-than-expected retail sales data from Mexico, as the surprising surge in US housing starts gave the Dollar a boost against many of its counterparts.

Retail sales in Mexico exceeded market estimates in April, rising by 3.8% year-on-year against an expected rise of 2.9%. Sectors such as textiles, clothing, and healthcare products, experienced notable expansion, while categories like hardware, household appliances, and auto vehicles saw sales decline.

This growth showcased the strength of the Mexican consumer, despite higher interest rates, which could give Banxico more room to maintain higher rates for longer to bring down inflation further.    

BRL

After rising nearly 0.9% yesterday, the Brazilian Real is pulling back slightly this morning amidst broad strength in the Dollar as traders position themselves ahead of Brazil's Central Bank monetary policy meeting tomorrow. Yesterday's rally helped the BRL reach a fresh high for June 2022 as concerns over the government's fiscal plans began to ease and showed signs of relatively strong economic growth. 

Meanwhile, President Lula da Silva reiterated demands for interest rate cuts from the central bank, although markets expect the bank to hold firm this month. However, falling inflation has raised expectations of rate cuts by Brazil's central bank, with yesterday's Central Bank survey showing participants expect rate cuts to begin in August. 

CNY

The Yuan is back in the red today, falling for the third-straight day after the PBoC cut its benchmark rates for the first time in 10 months. The Bank reduced the one-year and five-year loan prime rates by 0.1% to stimulate the slowing economy. The rate cut pressured the Yuan, testing the six-month low seen last Thursday, but it could also be felt in the bond market with China's 10-year yield sinking toward a 10-month low.

 

Meanwhile, global investment banks continue to lower their GDP growth forecasts for China due to weak economic data and persistent disinflation.