Daily Market Pulse

USD

The US Dollar is slightly higher this morning after failing to hold onto its early gains yesterday following Fed Chair Jerome Powell's Congressional testimony.

Powell's indication that there is still room for US interest rates to rise initially caused the Dollar to rise, as he stated that two more 0.25% rate hikes were likely if the economy continued on its current trajectory. However, traders once again shrugged off the hawkish comments, as the market is only expecting one more 0.25% hike this year, likely to be seen in July.

Meanwhile, Atlanta Fed President Raphael Bostic cautioned against further rate hikes, emphasizing that such moves could put a strain on the US economy. Earlier today, initial jobless claims came in at 264K, surpassing market expectations and matching the previous week's figure. In addition, the four-week moving average rose to 255.75K.

EUR

The Euro is down slightly this morning after surging over 0.6% yesterday amid a broad US Dollar selloff. The recent moves have EUR/USD trading near its highest level in six weeks as markets expect the ECB to remain hawkish alongside the BoE, SNB, and other central banks across the continent as Europe continues to battle inflation.

With no major economic data releases today, EUR traders will be focused on tomorrow's PMI data out of Germany, France, and the Eurozone as a whole. Markets anticipate all three will see their Composite PMI decline slightly in June, led by modest drop-offs in their respective service sectors. In addition, each Manufacturing PMI is expected to remain in contraction territory.

GBP

The Pound is down 0.15% on the day, following the BoE's decision to raise interest rates by another 0.50%, taking the benchmark rate in the UK to 5%. The Bank's decision was influenced by inflation that was higher than expected in May, as policymakers emphasized that interest rates could rise even further if price pressures persist. After the decision, markets are now expecting the peak rate to be around 6% by February 2024.

GBP traders will have little time to catch their breath as UK PMIs and retail sales data are slated for release tomorrow. PMIs are expected to show declines across the board in June, while May retail sales are expected to contract on both a monthly and annual basis.

JPY

The Yen is lower for the second straight day after dovish comments from the BoJ kept the pressure on the struggling JPY. Over the last week, USD/JPY has been trading near its highest level since November 2022 as traders look for direction ahead of the latest inflation and PMI data out of Japan set for release this evening.

Expectations are for Japan's annual CPI to rise to 4.1% in May, after coming in at 3.5% in the previous read. On the PMI front, the June manufacturing index is expected to remain mostly in line with the May level, while the Services PMI is projected to rise to 56.2 in June from May's 55.9 read.

CAD

The Loonie is mostly unchanged at the start of the day, after Canadian retail sales data came in better than expected, boosting the currency to a nine-month high and increasing expectations of another Bank of Canada (BoC) hike. Markets are currently expecting a 70% chance of another 0.25% rate hike at the BoC's July meeting.

According to the minutes released from their June meeting, the BoC stated that further rate hikes would depend on upcoming economic data. The bank cited stronger-than-expected growth and stubborn inflation as reasons why they may raise rates further. However, they did not explicitly signal a July rate hike, leaving the door open for a hold depending on upcoming data.

MXN

The Mexican peso is down by over 0.3% this morning after posting a 0.4% gain against the greenback yesterday. MXN is still near seven-year highs ahead of this afternoon's Banxico meeting.

The Bank of Mexico is expected to keep rates at 11.25% today after Governor Victoria Rodríguez said the bank was content to keep rates at current levels for some time.

Earlier today, headline inflation for the first half of June rose by just 0.02%, against an anticipated 0.15% increase. Meanwhile, core inflation over the same period rose by 0.11%, well below the 0.22% forecasted by markets.

BRL

The Brazilian Real hit a fresh one-year high this morning after the Brazilian Central Bank held their key Selic rate at 13.75% yesterday.

The bank said they need to be patient and that they are willing to resume tightening if inflation deviates from expectations. Inflation in Brazil has been below the central bank's upper target for three months in a row, hitting its lowest level since October 2020.

The decision was made alongside Brazil's Senate economic affairs committee approving new budget rules proposed by President Lula to tackle the growth of public debt.

CNY

The Yuan is slightly down this morning in the offshore market as local traders remain out on holiday.

The decline comes after the Yuan sank to a seven-month low yesterday, before rebounding intraday to end the day slightly higher.

With Chinese markets closed for the holiday and no major economic data releases scheduled until late next week, the Yuan's short-term direction will likely be influenced by broad market sentiment, particularly as Fed Chair Powell steps up to the podium in Washington for the second-straight day, as well as any news out of the CCP regarding new fiscal stimulus for its ailing economy.