Daily Market Pulse

USD

The Dollar Index is on pace for its best day in nearly five weeks, up around 0.50% on the day as Eurozone and UK data triggers a risk-off move across markets. PMI data from both economies indicate that rising interest rates are stifling growth prospects, yet inflation remains stubbornly high. With more rate hikes potentially on the way, market fears of a global recession have sparked a rally in safe-haven assets such as the Dollar.

Meanwhile, Fed Chair Jerome Powell wrapped up his two-day testimony in Washington yesterday, indicating that future rate hikes are likely if the US economy continues down its current path.

However, Powell noted that the Bank would make subsequent rate adjustments at a "careful pace" moving forward.

Later this morning, US PMI data is on deck, with June Composite and Manufacturing PMIs expected to remain in line with the May read, while the Services PMI is forecasted to fall slightly.

EUR

The Euro is plummeting this morning, down over 0.60% against the Dollar, as disappointing PMI data across the Eurozone triggered a selloff. As it stands, EUR/USD is now on pace for its worst single-day decline since March.

The Eurozone experienced a notable slowdown in private sector expansion, as indicated by the weakest Composite PMI since January. Manufacturing activity in the Eurozone contracted for the eleventh consecutive month, while the growth of the services sector reached its lowest point in five months. Meanwhile, in Germany, Europe's biggest economy, the Composite PMI dropped to a four-month low, while France witnessed its sharpest contraction since February 2021.

In addition to the data, ECB policymaker Pablo Hernandez de Cos stated that the Bank would raise rates again in July but stopped short of committing to further hikes.

GBP

The Pound is down for the second straight day and pacing for its first losing week in a month after disappointing PMI data stoked fears of a UK recession if interest rates remain on their current trajectory.

The data showed the services sector grew at a slower pace than expected while manufacturing contracted even further. Despite overall private-sector growth for the fifth consecutive month, it fell below market expectations and the previous read. The data gave fresh ammunition to GBP bears who have been concerned that the BoE's current tightening cycle would stifle the economy.

On the bright side, UK retail sales in May exceeded expectations, rising by 0.3% compared to April. Non-store retailing and automotive fuel sales grew, while food and non-food trade declined slightly.

JPY

The Yen is trading sideways this morning after suffering losses of around 0.85% yesterday against the Dollar. The Yen now sits at fresh November 2022 lows as traders digest recent inflation and PMI numbers out of Japan.

Japan's annual inflation rate unexpectedly fell to 3.2% in May, below market expectations of 3.5%. This decline was primarily driven by lower prices in furniture, household utensils, and fuel, while prices for transportation, clothing, and food increased.

In addition, the au Jibun Bank Japan Composite PMI indicated the sixth consecutive month of private sector growth, although slower than expected. New orders, employment, and foreign sales all experienced a slowdown, while business confidence fell to a five-month low.

CAD

The Loonie is stepping back this morning, down 0.5% against the Greenback as part of a cross-market flight to safety. Today's decline now puts the Loonie in the red for the week and on pace for its first losing week in a month. With the Canadian economic calendar empty today, the Loonie will dance to the beat of the US Dollar to close out the week.

Looking ahead, CAD traders will eagerly await Canadian CPI data on Tuesday for clues as to whether the BoC will deliver another rate hike at its July meeting. Later in the week, Canadian GDP numbers for April are also set for release.

MXN

The Mexican Peso is on the back foot again this morning, in the red for the second straight day and currently down over 1% against the Dollar on the week. Barring a sharp reversal, the Peso is on track for its first losing week since mid-May as risk-off sentiment weighs on LATAM currencies.

Yesterday, the Bank of Mexico held its key interest rate at 11.25% as expected, making it the second consecutive hold after hiking rates at the Bank's previous 15 meetings. The Banxico board emphasized their plans to maintain rates at 11.25% for an extended period to tame inflation. The Bank added they anticipate inflation to gradually decrease and approach the official target of 3% by Q4 of 2024.

BRL

The Brazilian Real failed to hold onto its early gains yesterday, finishing the day slightly lower by around 0.1% after initially scraping fresh one-year highs. The pullback continues this morning, with BRL down over 0.50% today, although still sitting in the green for the week as it looks to hang on for its fifth consecutive weekly gain.

Next week's calendar in Brazil includes several intriguing data releases, headlined by June's mid-month inflation read on Tuesday and wholesale inflation on Thursday. 

With the Brazilian Central Bank beginning to sound more dovish, both data points will be highly anticipated by BRL traders as markets expect rate cuts could come as soon as August if inflation shows signs of cooling.

CNY

Another day, another new low for the Yuan on Friday morning. The offshore CNY is down nearly 0.3% as the surging US Dollar puts the Yuan on pace for its sixth losing week out of the past seven.

Local financial markets remain closed for China's Dragon Boat Festival, making for another quiet day for headlines or data. Markets will be keeping tabs on the latest news about the progress of new fiscal stimulus measures from the Chinese government and any signs of intervention to backstop the faltering Yuan.