Daily Market Pulse
Dollar Holds Steady Ahead of US Consumer Sentiment
5 minute readUSD
After gaining over 0.5% yesterday, the Dollar Index is little changed this morning after the latest Michigan Consumer Sentiment Index release as sentiment dropped to 67.7 and inflation expectations also came in below consensus. As it stands, the Greenback is on track to secure its ninth consecutive winning week – its best streak in nine years.
Earlier today, the NY Empire State Manufacturing Index improved to 1.9 in September from a low of -19 in August. This suggests that business activity in New York remained stable, with increased new orders and shipments. However, employment levels declined slightly, and input prices stayed high.
In other news, import prices rose by 0.5% in August, the highest increase since May 2022, while export prices surged by 1.3%, the most in 15 months.
EUR
The Euro is modestly higher this morning following a dismal 0.8% decline against the Dollar yesterday thanks to the ECB's dovish rate hike. While ECB President Christine Lagarde insists otherwise, markets interpreted the ECB's messaging to mean interest rates have peaked, weighing on the Euro. Barring a significant reversal of fortune, EUR/USD looks poised for a ninth consecutive weekly decline.
On the inflation front, France posted an annual inflation rate of 4.9% in August, rising from 4.3% in July, primarily due to increased energy prices, particularly electricity. Meanwhile, Italy's annual inflation rate fell to 5.4% from 5.9%, marking its lowest level since January 2022, with slower price growth in various sectors, including non-regulated energy and recreational services.
GBP
The British Pound is inching lower today, hovering near a four-month low and on pace for a fourth straight week in the red as GBP traders gear up for next week's BOE decision. Markets are pricing in another 0.25% hike, which would take UK rates up to 5.5%.
Meanwhile, the BOE's latest consumer inflation expectations survey revealed that the median inflation rate expectation for 2024 was 3.6%, up slightly from 3.5% in May. 63% of respondents also expected interest rates to rise over the next 12 months, up from 57% in May.
JPY
The Japanese Yen is back in the red this morning and fast-approaching a 45-month low versus the Greenback, reigniting speculation of coming market intervention from Japanese officials to backstop the currency's slide.
As traders monitor their newsfeeds for any word from authorities regarding market intervention, they will also have one eye on next week's BOJ meeting. While no policy tweaks are expected, investors will be keen to hear from BOJ Governor Kazuo Ueda after his comments from earlier this week were interpreted as a subtle hawkish shift.
Next week's docket also includes Japanese trade, inflation, and manufacturing data before the BOJ decision.
CAD
The Canadian Dollar is on the back foot today but still on track for its first winning week since mid-July as CAD traders react to the latest data from the US and Canada.
In July, Canadian manufacturing sales rebounded by 1.6 with notable increases in food products, petroleum, and transportation equipment but declines in paper plastics and rubber products, driven partly by disruptions caused by a port strike in British Columbia.
On the other hand, foreign investment in Canadian securities rose again in July, continuing a four-month streak of stronger investment. Conversely, Canadian investors decreased their holdings of foreign securities, resulting in a net inflow of $9B into the Canadian economy from international transactions in securities.
MXN
The Mexican Peso is in the green for the fifth straight day, up over 2.5% on the week against the Dollar heading into the North American session. If the Peso can stay the course today, it will be on track for its best weekly performance since August 2022.
Looking ahead, consumer spending and aggregate demand data are due for release on Monday at 8:00 AM EST. The last consumer spending read showed a 4.8% year-on-year increase in Q1, continuing the solid upward trend since the lows seen in the pandemic. Meanwhile, the most recent aggregate demand report showed an annualized gain of 5.4%, the eighth straight quarter of growth.
BRL
The Brazilian Real is slightly lower this morning following a 0.9% rally yesterday after better-than-expected domestic service sector data. Despite the slight pullback today, the BRL looks well on the way to snapping a two-week losing skid against the Greenback.
Earlier today, Brazil's retail sales rose by a higher-than-expected 0.7% in July compared to June. Notable increases were seen in office, tech, and communication equipment, followed by personal and domestic articles. Meanwhile, sales declined for fuel and lubricants, furniture, and auto vehicles and parts. From an annual perspective, retail sales grew 2.4%.
CNY
The Chinese Yuan is up around 0.1% this morning and trading near a two-week high after better-than-expected data out of China was released overnight.
China's industrial production surged by 4.5% year-on-year in August, surpassing expectations of 3.9% and marking the most substantial growth since April. Manufacturing activity played a significant role in this expansion, rising by 5.4%.
Meanwhile, China's retail sales rose by 4.6% year-on-year in August, a significant acceleration from July, driven by solid performance in clothing, furniture, electronics, cosmetics, and automobiles. This marked the highest growth rate since May, contributing to a 7.0% increase in year-to-date retail trade.
