USD

Midweek market volatility persists as investors seek the next key catalyst. The U.S. dollar index stayed just above its lowest level in almost eight months on Wednesday, as increased chances of a U.S. recession and forecasts of less aggressive Fed policy tightening weighed on the currency. In terms of data, On Tuesday, S&P Global PMI surveys from the United States revealed that private-sector economic activity continued to decrease in early January, with the Composite PMI reading 46.6. Weakening economic statistics in the United States and mixed business earnings suggest that the larger economy is facing difficulties. Investors are now looking forward to a rush of U.S. data that could provide hints about the rate path, such as the Q4 GDP growth rate and the PCE price index.

EUR

After gaining 0.14% on Tuesday, the Euro is losing ground today as the market remains cautious and the dollar is slightly higher. In recent data releases, the Eurozone PMI manufacturing and services sectors both strengthened, above forecasts. Business optimism rose sharply to its highest level since May, accompanied by net job gains. Nonetheless, the Euro was unable to get more support from the data and fell today. In other news, ECB council member Panetta emphasized that the bank should not commit to rate changes beyond the February meeting, leaving an element of uncertainty.

GBP

The Pound is somewhat weaker today, following its downward trend (0.36%) from yesterday. The Sterling is struggling to recover as markets keep a tight eye on political developments in the United Kingdom. In recent events, electricity rates in the UK fell below GBP 150 per megawatt hour, approaching levels not seen since September 2021, as unexpectedly warm weather in the UK and Europe cut demand and relieved stress on the country's energy systems. Furthermore, the UK's abundant energy sources and declining natural gas prices were important drivers of decreased electricity pricing. On the policy front, the UK has committed approximately £60 billion in energy-bill assistance for homes and companies until April 2023. In other news, data released on Tuesday revealed that British private sector output declined further in January due to extensive strike action and the cost of the living problem, all of which conspired to constrain economic activity.

JPY

Japan is recouping its losses today after falling 0.8% versus the U.S. dollar yesterday. According to the most recent statistics, the Jibun Bank Japan Manufacturing PMI remained at 48.9 in January 2023, unchanged from December's 26-month low and below market forecasts of 49.4. It was the third consecutive month of factory activity fall due to sluggish demand and continuous cutbacks in output and new orders. Meanwhile, employment growth has quickened, with work backlogs reducing more slowly. Finally, corporate sentiment increased from a seven-month low in December, owing to optimism about a market recovery in 2023.

CAD

The Loonie closed in positive territory for the fourth consecutive trading day on Tuesday but lost steam early Wednesday. Before placing large wagers on the Loonie, market investors are keenly awaiting the Bank of Canada's monetary policy decision. The Bank of Canada raised its policy rate by 25bps to 4.5%, in line with expectations. However, in their policy statement, they alluded to "holding" rates for the near future to asses the impact of all of their hikes to date. The initial reaction in #USDCAD is a .5% higher back above 1.3400. 

MXN

Peso saw moderate gains (0.12%) on Tuesday and sustained its profits this morning following inflation data. Mexico's mid-January inflation data exceeded expectations for both headline and core prices; core CPI now stands at 8.45% year on year, contrary to the Banxico inflation target of 2%-4%. According to a Citigroup analysis, upside risks to Mexican inflation remain considerable, particularly those connected to global and U.S. inflation. The TIIE curve now anticipates a slightly more than 25bps rate hike at the February 9 Banxico meeting, raising the policy rate to 10.75% and some more hikes at the March meeting before the tightening cycle concludes at 11%.

CNY

Chinese markets will be closed from January 21st to 29th for the Lunar New Year holidays and will reopen on January 30th.

BRL

The Real is trading in the green today, with investors looking for clues about the Lula government's economic agenda and monetary policy in the United States. Global inflation and worries about economic recession, as well as the ramifications for economic policy, remain a priority in international markets. In the domestic market, President Luiz Inácio Lula da Silva will visit Montevideo on Wednesday for a meeting with Uruguayan President Lecalle Pou. In other news, the seasonally adjusted FGV Consumer Confidence Index in Brazil declined by 2.2 points to 85.8 in January 2023, showing a deterioration in expectations for the coming months, according to the most recent data.