Daily Market Pulse

USD

The US dollar begins the day higher after posting two consecutive losing days to start the week, as traders look forward to this morning's policy panel at the ECB Forum on Central Banking.

The panel will feature commentary from key central bank leaders from across the globe, including Fed Chair Jerome Powell. Traders will be keen to hear Powell's insights on interest rates. However, he is unlikely to deviate from his position last week, when he reaffirmed to US congressional leaders the Fed's hawkish outlook on US interest rates.

Earlier today, US mortgage applications showed an increase for the third week in a row, posting a 3% increase last week. Home purchase applications increased by 2.8%, and refinance applications increased by 3.3%. However, existing home sales were limited due to low inventory.

EUR

The Euro is trading lower this morning on the heels of yesterday's 0.5% gain against the Greenback, fueled by more hawkish ECB rhetoric.

Euro traders will be eyeing commentary from ECB President Christine Lagarde when she speaks at the ECB Forum on Central Banking, where she is expected to continue emphasizing the need for higher interest rates to combat European inflation.

On the data front, Germany's consumer morale worsened due to declining economic and income expectations, impacted by high inflation rates. However, France saw improved consumer confidence, with optimism about living standards and reduced concerns about unemployment. Meanwhile, Italy's annual inflation rate dropped to 6.4% in June, the lowest in 14 months and below market expectations.

GBP

After a decent start to the week, the Pound is plummeting this morning, down around 0.9% against the Dollar heading into the US session. Today's decline puts GBP into negative territory for the week, ahead of BoE Governor Andrew Bailey's commentary at the ECB Forum on Central Banking.

Markets have already braced for more interest rate hikes in the UK than previously expected after last week's surprising 0.5% hike from the BoE. However, the hawkish outlook on interest rates has not been overwhelmingly bullish for the Pound, as concerns mount over potential damage to the UK economy if the tightening cycle persists.

JPY

The Japanese Yen remains on the decline again this morning, down for the sixth consecutive day as it continues to set new seven-month lows against the Greenback. Despite more rhetoric from Japanese authorities regarding possible FX market intervention, they have yet to take any action to backstop the Yen's slide.

JPY traders will look to Japan's retail trade data set for release this evening as Asian markets reopen. Expectations are for retail trade to show a decline of 0.2% month-on-month in May after dropping 1.2% in April. However, from an annual perspective, retail trade is expected to show growth of 5.4% - up from the 5% seen in the previous reading.

CAD

The Loonie is down around 0.6% this morning, marking its second straight day in the red, amidst broad demand for Dollars ahead of this morning's central bank policy panel in Europe.

The decline of the Loonie is also fueled by yesterday's Canadian CPI report, which showed signs of easing despite remaining above the BoC's 2% target. While markets are still pricing in another hike in July, there are doubts about how aggressive the Bank will be heading into the second half of 2023.

Adding to the struggles of the Loonie, oil prices are down for the third consecutive day after yesterday's stronger-than-expected US data increased traders' perception that the Fed may have enough bandwidth for multiple rate hikes in the second half of 2023, putting a damper on oil prices.

MXN

The Mexican Peso is down this morning as the strengthening of the US Dollar weighs on LATAM currencies heading into the US session. The Peso is also feeling the effects of weaker oil prices, a major export of Mexico.

With no significant Mexican economic releases scheduled until Friday's unemployment data, the MXN will be at the mercy of the US Dollar as traders await comments from Fed Chair Powell around 9:30 AM EST. More hawkish rhetoric from Powell will keep Peso bulls on edge as the odds increase for the US-Mexico interest rate differential narrowing later in the year.

BRL

After beginning yesterday in positive territory, the Brazilian Real reversed course and finished the day down around 0.9% against the Dollar. The pullback continues today as the Real starts the day down another 1%.

The Real's reversal comes on the heels of yesterday's release of the latest meeting minutes from the Brazilian central bank, which hinted at a possible interest rate cut in their August meeting as long as a favorable inflation outlook remains in place.

Earlier today, Brazil's loan growth release showed that outstanding loans in Brazil increased by 0.3% in May, primarily driven by a rise in individual consumer credit. However, the growth rate was slower compared to the previous year. Default ratios for consumers and businesses also slightly rose, reaching the highest level since February 2018.

CNY

The yuan is down nearly 0.6% against the dollar in the offshore market today, failing to build on yesterday's rally, which was driven by the recent signs of the People's Bank of China (PBoC) intervening to prop up the renminbi (CNY).

In addition to the PBoC's higher-than-expected onshore fixing rate seen Monday and Tuesday, China's state banks also intervened to support the currency.

Meanwhile, China's industrial firms experienced an 18.8% year-on-year decline in profits in the first five months of 2023 as China's economy continues to struggle. Both state-owned and private-sector firms saw profits shrink, with several industries, including petroleum, coal, chemical products, and computer equipment, all seeing significant losses.