Daily Market Pulse
Loonie Bounces Back from 5-Month Low Following Canadian Employment Data
5 minute readUSD
The Dollar Index is mostly unchanged this morning but still on pace for its eighth consecutive week of gains – its longest weekly winning streak in nine years. The US calendar is relatively light today, although there are some minor data releases for traders to consider before the weekend.
US wholesale inventories, due at 10:00 AM EST, are projected to have declined by 0.1% in July, matching the June figure. This result would mark the fifth consecutive month of declining inventories, a positive trend for the wholesale sector.
At 3:00 PM EST, the Fed will release its consumer credit change report for July, and it is expected to decrease slightly to $16 billion from the $17.85 billion seen in June.
EUR
The Euro is slightly higher today but failing to gain significant ground on the US Dollar following today's CPI report out of Germany. As it stands, EUR/USD looks on track for its eighth-straight weekly loss.
Germany's CPI for August was confirmed at 6.1% year-on-year, matching the preliminary estimate, while the core rate remained steady at 5.5%. On a monthly basis, prices increased by 0.3%, matching the July read.
Meanwhile, France's industrial output rose by 0.8% in July, mainly due to increased manufacturing in sectors like transport equipment and food products, while Spain's industrial production fell by 1.8% in the same period.
GBP
The British Pound is trading sideways today, on pace for its third consecutive losing week and continuing to hover at a three-month low versus the Greenback as traders continue to scale back bets on further BOE interest rate hikes. While the odds of a September rate hike remain high based on current market pricing, further hikes are now in doubt after BOE Governor Bailey's somewhat dovish remarks earlier this week.
With the UK calendar empty today, GBP traders will shift their focus to next week, where the UK's latest unemployment, average earnings, GDP, and consumer inflation expectations are all on deck.
JPY
After posting gains in each of the previous two sessions, the Japanese Yen is inching lower this morning versus the Greenback – keeping the Yen pinned to a ten-month low.
In Q2, Japan's economy grew by 1.2% quarter-on-quarter, slightly below market expectations of a 1.3% increase, but marking the second consecutive quarter of growth and the fastest expansion since Q2 2022. On an annualized basis, GDP rose by 4.8%, lower than the preliminary estimate of 6.0%. The growth was driven by positive contributions from net trade, with exports rebounding and imports declining. Still, output was weighed down by subdued government spending growth and declining business investment and private consumption.
CAD
The Loonie is up 0.5% today, rebounding from a five-month low following this morning's Canadian labor market data. Despite the move, the Loonie has more work to do to avoid its eighth-straight weekly loss.
Canada's unemployment rate held steady at 5.5% in August, remaining unchanged from July after three consecutive monthly increases. Meanwhile, the Canadian economy added 39.9K jobs, surpassing expectations of just 15K, with notable increases in employment seen in professional, scientific, and technical services and construction. However, population growth outpaced employment growth, causing the employment rate to fall slightly to 61.9%.
MXN
The Mexican Peso is up over 0.5% this morning as it looks to secure its first winning day since August 30. The Peso's performance over that time marks its worst two-week stretch since March and has the currency sitting at a three-month low.
The recent MXN selloff picked up after Banxico's surprise announcement to roll back its FX hedging program. It was further fueled by a mix of unfavorable domestic data, namely an uptick in unemployment and a slowdown in GDP growth.
Mexico's economic calendar is nearly empty next week, with Monday's industrial production read the lone notable release.
BRL
The Brazilian Real is trading sideways this morning as Brazilian traders return from Independence Day celebrations. Despite holding ground against the Greenback this morning, BRL remains down 0.5% on the week and looks to be trending towards its fifth losing week out of the past six as persistent Dollar strength weighs on the Real.
Next week's calendar is packed with key data for Brazil, highlighted by consumer inflation on Tuesday, business confidence on Thursday, and retail sales on Friday. These will be the last major releases ahead of the BCB's upcoming interest rate decision on September 20, where another rate cut is expected.
CNY
The Chinese Yuan is down for the fifth straight day, sinking to a new 16-year low in the onshore market and a ten-month low in the offshore market, both of which now rank amongst the worst-performing Asian currencies this year.
Yuan traders will be keen to see August's inflation numbers out of China, set for release at 9:30 PM EST tonight, after annual consumer prices fell in July for the first time since February 2021. Market consensus indicates an annualized increase of 0.2% and a monthly rise of 0.3%. On the other hand, producer prices are projected to post an annualized decline of 3%, marking the 11th consecutive month of deflation.
