Daily Market Pulse

USD

The Dollar Index finished last week up 1.4%, its biggest weekly gain since February and its highest closing level in five weeks. The rally was driven primarily by risk-off sentiment that sparked demand for safe-haven assets. The Greenback has cooled slightly as a new week begins, trading down around 0.2% heading into the US session. Markets are preparing for a week that could be filled with volatility for the US Dollar. This anticipation stems from the upcoming meeting between President Biden and top Congressional leaders, where they will discuss and negotiate a potential agreement on the debt ceiling. Additionally, several Federal Reserve officials are scheduled to deliver speeches alongside important data releases like retail sales, housing starts, and jobless claims.

EUR

The Euro is up around 0.2% this morning after sustaining losses of over 1.5% against the Dollar last week. This morning’s move higher comes as market sentiment slightly improves in hopes that US lawmakers will reach a debt ceiling deal this week. Earlier this morning, industrial production in the Euro Area recorded a significant month-over-month decline of 4.1% in March, surpassing market expectations of a 2.5% decrease. The sharp drop was primarily driven by a substantial reduction in the production of capital goods, including buildings and equipment, which saw a notable decline of 15.4 percent. Meanwhile, German wholesale price data showed a decrease in the index for the first time since 2020.

GBP

Sterling is up against the Euro and Dollar to start the week, approaching multi-month highs once again, ahead of crucial wage data that will influence the Bank of England’s future interest rate decisions. Heading into the US session, GBP is up around 0.5% against the Dollar after hitting a one-year high last week. Meanwhile, EUR/GBP is slightly lower by 0.2%. Tomorrow’s UK employment data could influence future Bank of England interest rate hike probabilities, which currently point to at least one more 0.25% hike this summer. Bank of England is concerned about the potential long-term impact of solid wage growth on inflation, so a strong showing in tomorrow’s data could keep the Bank hawkish for longer.

CAD

The Loonie closed deep in the red last week after posting its worst weekly performance in nearly a month. USD/CAD finished the week up almost 1.4%, although improved risk sentiment and strong Canadian housing data have seen the pair pull back nearly 0.4% this morning. 

Canadian April housing starts showed a year-on-year increase of 261.6K – well above the expected 224.6K and the previous read of 213.8 K. In addition, Canadian wholesale sales improved in March versus February, still posting a decline of 0.1%. Tomorrow will be a big day for Loonie traders as April US retail sales and Canadian CPI are on tap, as markets expect both core and headline inflation in Canada to have cooled in April. 

MXN

MXN finished last week up nearly 0.9% against the Dollar, building on the previous week’s jump of 1.33%. However, the Peso begins this week slightly lower ahead of Thursday’s Bank of Mexico interest rate decision. Markets expect the Bank to stand pat on rates, ending its tightening cycle that saw rates rise 7.25% since June 2021. Meanwhile, Mexican retail sales data is set for release on Friday, with consensus forecasts pointing to a year-on-year rise of 2.9% in March. 

Outside of domestic data, the Peso’s performance this week may also be affected by market risk sentiment, as a continuation of last week’s risk aversion could weigh on MXN and LATAM currencies as a whole. 

BRL

The Brazilian Real is up again this morning, putting it on pace for its fifth straight day of gains dating back to last Tuesday. BRL is keeping pace with its surging LATAM peers, despite the increasing likelihood that the Brazilian government’s campaign for lower interest rates may begin to bear fruit as inflation appears to be slowing. March retail sales are next on the Brazilian economic calendar – set for release this Thursday. Markets expect a modest monthly rise of 0.1% after posting a 0.1% drop in February.

CNY

The Yuan has turned positive on the day after falling to a two-month low earlier in the morning as markets brace for potential monetary stimulus from the Peoples Bank of China in the coming months. This evening, highly anticipated retail sales and industrial production data out of China are set for release. Markets expect significant rebounds on both numbers from previous reads, although the recent string of misses on Chinese economic data may make some traders hesitant to be overly optimistic. CNY traders will also be keen to see Tuesday’s housing prices and Friday’s foreign investment data out of China, as these will be their last sets of data to digest before the PBoC’s May 21 interest rate decision.