USD

The US Dollar is in the green again this morning and trading at its highest level since mid-March following the red-hot US ISM Services PMI reading yesterday. While market pricing still points to the Fed holding off on raising rates again this month, the odds of another 0.25% hike by the end of the year have now risen to 50%.

Meanwhile, initial jobless claims dropped to 216K last week, the lowest since February, while continuing claims also decreased to 1.679M, indicating a solid labor market despite earlier signs of softening.

In addition, labor productivity in nonfarm businesses increased by 3.5% in Q2, slightly lower than the preliminary reading but better than market expectations.

EUR

The Euro is on the back foot today and sitting near a three-month low as traders digest this morning's lackluster European data. The odds of the ECB raising rates at their meeting next week have fallen below 40%, weighing on EUR/USD.

Eurozone GDP grew by a mere 0.1% in Q2, revised down from the initial estimate of 0.3%. Performance among major economies varied, with Germany stagnating, France expanding by 0.5%, Spain growing by 0.4%, and Italy contracting by 0.4%.

Additionally, Germany's industrial production contracted by 0.8% month-over-month, worse than expected, marking the fourth decline this year.

GBP

The British Pound is down for the third straight day in the aftermath of BOE Governor Bailey's comments in front of the UK Parliament yesterday, which indicated the Bank may be nearing the end of its tightening cycle despite UK inflation remaining elevated. BOE member Swati Dhingra also expressed concerns regarding the negative impact of higher rates on the economy.

On the data front, UK home prices fell 4.6% year-on-year in August, according to the Halifax House Price Index. It is the most significant drop since August 2009, as higher mortgage rates have sapped demand. On a monthly basis, house prices also saw a notable 1.9% decline, the largest monthly drop since November 2022.

JPY

After barely eking out a 0.05% gain yesterday, the Japanese Yen is inching higher this morning despite disappointing economic indicator readings released overnight.

Japan's index of coincident economic indicators dropped to 114.5 in July, its lowest level since April, reflecting ongoing economic concerns. In addition, the index of leading economic indicators fell to 107.6, the lowest since October 2020, signaling a worsening economic outlook led by a contraction in manufacturing and subdued service sector growth.

Also crossing the wires, BOJ policymaker Junko Nakagawa emphasized the need to maintain ultra-loose monetary policy, citing both upside and downside risks to inflation.

CAD

The Loonie is declining this morning, holding near a five-month low after the BOC decided to keep rates at 5% yesterday. In its statement, the Bank acknowledged the Canadian economy's weakening growth while noting that the door for further hikes remains open should inflation persist. BOC Governor Tiff Macklem will hold a press conference this afternoon to discuss the decision.

Meanwhile, Canadian building permits dropped by 1.5% month-on-month in July, which was better than the expected 5% decline. July's result was mainly due to a significant decrease in non-residential permits, especially in institutional and commercial construction. However, residential permits increased by 5.4%.

MXN

The Mexican Peso is rallying this morning after a dismal five-day stretch that saw the currency shed around 5% against the Greenback. Today's rebound comes as MXN traders assess Mexico's latest inflation and auto production data.

Mexico's annual inflation rate was 4.64% in August, marking the 7th consecutive monthly decline but still slightly above market expectations. Price decreases were notable in categories such as restaurants, hotels, and miscellaneous goods and services. Additionally, core inflation eased to 6.08% in August, the lowest since December 2021.

In addition, Mexico's car production increased by 2.8% year-on-year in August compared to the previous year, marking the 16th consecutive month of growth.

BRL

After posting two consecutive days of losses, the Brazilian Real is finding some reprieve today as Brazilian markets close for Independence Day. The Real now sits near its lowest level since May, thanks to its steady declines over the last two weeks as LATAM currencies feel the pressure of a stronger US Dollar.

Looking ahead to tomorrow, Brazil's IPCA inflation reading for August is scheduled for release at 8:00 AM EST. After experiencing a steady softening in monthly inflation since February, the index saw an uptick in July to 0.12% after prices declined by 0.08% in June.

CNY

The Chinese Yuan is down over 0.2% today, marking its fourth consecutive losing day following soft trade data out of China. Despite the PBOC's efforts to prop up the Yuan with stronger fixes, the CNY fell to a 16-year low against the Dollar in the onshore market.

China's trade surplus declined to its lowest level since May, with exports falling 8.8% year-on-year and imports decreasing by 7.3%. This marks the fourth and sixth consecutive months of decline, respectively. Notably, China's exports to the US fell by 9.53% from the previous year, and those to the EU tumbled by 19.58% over the same period.