USD

On Friday, the dollar index remained near 102 as better-than-expected fourth-quarter U.S. GDP figures bolstered prospects of a soft landing in the world's largest economy, while investors anxiously await U.S. PCE data for clues on the Federal Reserve's interest rate path. The U.S. economy grew by 2.9% year on year in the fourth quarter, exceeding expectations of 2.6% growth. However, there were some hints of economic difficulty, with most analysts predicting a small recession by the second half of 2023, supporting betting on a less aggressive Fed tightening. U.S. inflation has also weakened the case for a lesser rate hike, with money markets now pricing in a 25 basis point increase at the next policy meeting. Investors react to U.S. PCE data, the Fed's preferred inflation indicator, meeting expectations and releasing pressure on the currency early Friday.

EUR

The Euro ended a three-day winning streak (0.22%) on Thursday and opened the day marginally weaker. Christine Lagarde, President of the European Central Bank (ECB), is due to speak today, but she is unlikely to remark on policy because the 'silent period' has already begun. Meanwhile, loans to households in the Eurozone climbed 3.8% year on year in December 2022, dropping for the fourth consecutive month and marking the smallest gain since May 2021 as rising borrowing costs and persistently high inflation weighed on demand. Credit growth in the private sector, which includes households and non-financial firms, has slowed to 4.2% from 5.1%.

GBP

Sterling was under moderate bearish pressure during Asian trading hours and fell below after closing essentially flat on Thursday. According to Reuters, British Treasury Secretary Jeremy Hunt will declare on Friday that he will address the country's low productivity growth by utilizing post-Brexit finance reforms to encourage more investment in the economy. On the data front, it will be a quiet day in the UK, with investors likely to stay focused on yesterday's U.S. Q4 GDP figures, which showed the economy expanded by 2.9%, relieving some concerns that the world's largest economy is on the verge of a recession.

JPY

Following the release of inflation numbers, the Yen is up 0.36% today after dipping 0.48% yesterday. Investors absorbed data revealing that Tokyo's inflation exceeded expectations in January, putting additional pressure on the Bank of Japan to modify its ultra-low interest rate policy even further. The core consumer price index for the Tokyo metropolitan area in Japan increased 4.3% in January 2023, the quickest rate since 1981 and above predictions for a 4.2% increase amid expanding inflationary pressure. This puts additional pressure on the Fed to leave its ultra-easy monetary policy through yield target revisions. Nonetheless, BOJ Governor Haruhiko Kuroda maintained his denial of a hawkish bent, emphasizing that the bank must continue to support the economy until the current cost-push inflation evolves into demand-driven inflation supported by wage growth.

CAD

After gaining 0.53% yesterday, Loonie consolidated its gains today. The U.S. dollar is undermining the Loonie that is supported by generally positive U.S. macro data issued on Thursday and is edging higher on the final day of the week. Markets, on the other hand, continue to believe that the Fed will moderate the pace of policy tightening and deliver a modest 25 basis point rate hike in February. This prevents dollar bulls from making aggressive bets. Aside from that, the commodity-linked Loonie is being supported by the underlying bullish attitude surrounding Crude Oil prices. The main focus now will be on the conclusion of the U.S. Core PCE Price Index. Aside from that, oil price dynamics should add some impetus to the Loonie prices.

MXN

On Thursday, the Mexican Peso fell for the first time in five days as U.S. statistics showed the economy grew faster than expected in the fourth quarter, sending the dollar and Treasury yields up on optimism of a soft landing. Mexican swap rates rise for the third day in a row, tracking a weakening Peso and higher U..S. yields. The TIIE curve currently anticipates a 25bp rate hike at the February 9 Banxico meeting, raising policy rates above 10.75% and another 25bp hike at the March meeting before the tightening cycle concludes above 11%. Meanwhile, according to Omar Mejia, the new deputy governor, Banxico would weigh Fed movements and domestic inflation statistics for early January in its February rate decision. Peso is rising in today's session and is up 0.11% for the day.

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 drifting lower on Friday, with investors still absorbing the United States GDP data and anticipating the Federal Reserve's next steps. Domestically, emphasis is centered on the next actions of Petrobras' new president, Jean-Paul Prates. Investors should pay close attention to the present management's strategic objectives. On the data front, foreign direct investment in Brazil was USD 5.6 billion in December 2022, slightly less than the USD 5.7 billion predicted by market analysts. Foreign direct investment almost doubled to nearly USD 90.6 billion in 2022, the highest level since 2012, up from USD 46.4 billion the previous year. Figures surpassed the central bank's expectation of USD 80 billion, as improved economic activity and company profitability in the country aided in attracting more investment.