Daily Market Pulse
USD Holds Steady After Early Slump as Investors Await Fed Minutes
2 minute readThe USD shed 0.15% yesterday after being down as much as 0.35% early in the North American session. US technology shares struggled ahead of key chipmaker Nvidia earnings, and US yields edged lower ahead of today’s latest FOMC decision meeting minutes. The USD enters today flat to yesterday’s close. The Fed’s various speakers of late have made the case for the central bank taking its time in assessing the timing of a first cut in rates, and today’s meeting minutes may provide further clarity about what will give the Fed greater conviction that inflation is sustainability slowing.
EUR/USD traded 0.3% higher yesterday, outperforming the G10 space. The ECB’s negotiated wage indicator showed Q4 pay growth is down from a record of 4.7% in Q3, a welcome sign as the ECB has signaled that wages are a key data input at this stage. Eurozone aggregate EZ consumer confidence is released at 10AM.
GBP/USD rose 0.3% yesterday and enters today flat to yesterday’s close. BOE Governor Bailey drove rate cut bets higher yesterday after saying “we don’t need obviously inflation to come back to target before we cut interest rates. I must be very clear on that, that’s not necessary,” Bailey said. Odds of a BOE rate cut by the June decision imply a 2/3 likelihood after entering the week around 50%.
USD/CAD fell 0.25% yesterday after domestic inflation slowed more than expected (2.9% year-over-year, 3.3% expected). Speaking at a media event in Vancouver yesterday Canadian PM Trudeau commented on monetary policy briefly, stating "we are optimistic that the Bank of Canada will start bringing down interest rates some time this year - hopefully sooner rather than later". December retail sales data is released tomorrow.
USD/MXN is unchanged today despite a fairly large retail sales miss, the currency continuing several sessions of low volatility ahead of today’s Fed minutes release.
USD/ZAR is down 0.5% today after the South African administration said it will use its gold and foreign-exchange reserves to reduce the level of public debt auctions.
