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CAD Holds in Narrow Range Around 1.37; BoC Inflation Worry

CAD Slumps to 1.37; Oil Slips

CAD Pushes to Low 1.34s; May Extend on GDP Data

Possible US Government Shutdown Stems Dollar’s Surge

US Dollar Remains strong, Gaining Against G10 Currencies

CAD Holds Range in Quiet Trade

Canadian Retail Sales Out Today

Fed's Higher for Longer Message Weighs on Markets

USD Lower Ahead of FOMC

CAD Stronger Ahead of CPI

Markets Await US Retail Sales Data Today

Markets Defensive Ahead of US CPI

CAD Holding Below 1.36; Little Changed on The Session

CAD adds to Friday’s gains but retains a soft undertone

Canadian Employment Data Out This Morning

Today's US Data Typically Do Not Move The Markets

An Unsurprising Pause By The Bank of Canada Today

US Payrolls And Canadian GDP Will Influence Market Direction

The Federal Reserve's Tightening Phase May Have Peaked

Markets Rangebound Ahead of Friday’s US Payroll Data

Greenback Remains Rangebound in Quiet Trade

USD Advances Ahead Of Powell’s Speech

Markets Steady Ahead Powel’s Jackson Hole Comments

Oil Slips; CAD Remains Under Pressure

Loonie Underperforms Despite Firm CPI Data

Canadian Inflation Expected To Remain Around 3%

CAD Weaker as Risk Sentiment Persists

Markets Trading Calmer; Driving USD Lower

Risk Off Mood Drives USD Higher

US and Canadian payroll numbers ahead

USD/CAD Trading In The Upper 1.33’s To Start The Day

USD Under Pressure After Fitch’s Downgrade

USD Still Fighting for Direction

USD Gains Stall to Close The week

USD Softer After FOMC, ECB Ahead 

USD Mixed Ahead of Tomorrow’s FOMC

USD Rebounds Against Most Majors

USD Losses May Extend Further Over Coming Weeks

USD Extends Decline Against Majors

BoC Likely to Raise Interest Rates by Another 25bps

US and Canadian Jobs Data Ahead

US and Canadian Employment Data Under The Microscope

Canadian April GDP & Business Outlook Survey Likely CAD Supportive

USD Strengthens Ahead of Core Inflation Print Tomorrow 

USD Gains Limited to Start Trading Day

Canadian Inflation Data Ahead

USD Recovers to Close the Week 

Inflationary Pressure Continue to Drive FX Environment 

USD Marginally Stronger; Canadian Retail Sales Ahead 

USD Mixed; Markets Await Powell 

USD Undertone Remains Weak 

The Fed Paused Yesterday but Signalled Two More Hikes 

USD Lower Ahead of Inflation Data

Canada Releases Job Numbers this Morning 

Bank of Canada Surprises with a Hike 

Expect a Hawkish Hold by the Bank of Canada Today 

USD Likely to Drive Lower Unless Non-Farm Payrolls Come in Strong

USD Mixed Ahead of Tomorrow’s NFP Report

USD Gains Broadly; Attention Shifts to NFP Report 

USD Softens Across the Majors

USD Edges Higher After Release of FOMC Minutes

USD Higher; FOMC in Focus

Price Pressures Suggest BoC May Hike Rates Again

US Debt Ceiling Driving FX

April Inflation Report Brings Hope for USD

US CPI in Focus

USD/CAD Opens Just Shy of 1.34 Handle

It’s Jobs Friday

USD Mixed after FOMC, ECB Ahead

Fed Day

Market Refocuses on US Price Data

USD Slips on Renewed Regional Bank Concerns

USD Drifts Lower

US Regional Bank Crisis Continue to Dominate Headlines

Canadian Retail Sales Released Today

Fed Likely to Raise Interest Rates by 0.25% in May

Canada Reports March CPI Today

USD Headed Lower as Week Closes

A Sharp Fall in US Headline CPI Yesterday has Helped Soften the Dollar

BoC Announcement – No Reason to Expect a Move

FX Markets Quite Ahead of Long Weekend

A Fall in US Job Openings Puts Recessionary Fears back in Focus

CAD Trading Higher for Seventh Consecutive Day

USD Safe Haven Status Dented

Daily Commentaries

<h3>USD - US Dollar</h3><p>FX liquidity was reduced yesterday due to a national holiday in the UK, and while major pairs did not move dramatically, we saw quite significant gains in some G10 commodity currencies including the CAD. This morning, some weaker-than-expected import data (-7.9% year-on-year) out of China seem to be softening the tone for the commodity space and maintaining a not-so-constructive picture on the demand side. This will be a crucial week for markets to fine-tune their Fed rate expectations after Chair Jerome Powell seemed to trade the explicit openness to a pause in tightening with pushback against rate cut speculation last week. There are currently 68bp of easing priced into the USD by year-end, with three drivers set to influence further swings: US banking developments, data and Fedspeak. The short term outlook for the USD remains neutral and rangebound.</p><h3>CAD - Canadian Dollar</h3><p>The US dollar recovered from CAD 1.3315 yesterday to almost CAD 1.3390. It is consolidating in a narrow range below there today (~CAD1.3365-CAD1.3385). Recall that last week, it peaked near CAD 1.3640. Overall Canada’s fundamental position remains solid although the current account dipped back into deficit and the adjustment in housing to higher interest rates creates some strains. Inflation is a bit lower than in the US and the BoC has paused the tightening process. Most analysts continue to remain neutral on the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> in the short term.</p><h3>EUR - Euro</h3><p>The euro is the most overbought currency in G10 according to CFTC data and speculators continue to add net-long positions in <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a>. This mostly has implications for the near term, so, while most remain bullish on EUR/USD in the longer run on the back of US-eurozone divergence and pronounced undervaluation, we flag positioning as one reason to be cautious on the short-term outlook. This week’s eurozone calendar is not very exciting and is highlighted by only by several ECB speakers. We expect 1.10 to keep being the anchor for EUR/USD this week.</p><h3>GBP - British Pound</h3><p>There are no key data releases before the Bank of England meeting on Thursday. We expect a 25bp rate hike, with a 7-2 vote split, an upward revision in growth projections and a reiteration that further tightening is possible if “persistent” inflation signs emerge. We don’t expect to see huge volatility on the pound around the release, and see <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> consolidating at levels above 1.25 in the aftermath of the BoE meeting.</p>

<h3>USD - US Dollar</h3><p>The US dollar is experiencing a general decline in trading and is likely to close the week on a weak note. This could mark the end of a period of consolidation for the currency and signal a broader downward trend according to technicals. Market focus is on US interest rate policies and short-term yields, which have seen a slight increase today. While the USD is expected to remain weak in the short term and attract selling interest, it is unclear if the decline will continue significantly. This week’s ADP report showed a strong gain in private sector jobs, raising expectations for the NFP report today. The consensus call is for 185k jobs, although some late entries in the Bloomberg survey are predicting 200k or more. The overall trend in the US labor market appears to be slowing, but it may take a significantly lower result (100k or less) to cause a major impact on the USD's value today.</p><h3>CAD - Canadian Dollar</h3><p>Ahead of this morning's job data, the Canadian dollar is making slight gains against a weaker US dollar. The employment data for April is expected to show a gain of 20k, which is significantly lower than the 12-month average of 35k. Although the labor market remains tight, there are concerns that wage growth may be slowing down. Governor Macklem's recent comments on inflation highlight the challenges that lie ahead in achieving price stability, and although he expressed optimism, the possibility of higher rates cannot be ruled out. Market analysts are currently factoring in the risk of slightly more than one 25 basis point rate cut by the end of the year. Observe the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>Yesterday, the European Central Bank (ECB) reported that rate hawks abandoned their push for a more aggressive tightening move. This may be due to the clear signals from the policy statement and President Lagarde that there would be more hikes (at least two) in the coming months. Lagarde skillfully balanced hawkish messaging to keep the euro supported while also maintaining enough flexibility in policy setting. As a result, the euro is expected to remain well-supported, even on minor dips, at least in the short term.</p><h3>GBP - British Pound</h3><p>The British pound is performing moderately well today, with a 0.3% gain against the weaker US dollar. This has resulted in a new cycle high for <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> and the strongest close in a year. Despite early indications of significant losses for the Conservative party in the UK local elections held yesterday, investors appear to be largely unfazed. With around 8,000 local council seats up for grabs, the results so far suggest that the party may lose nearly a thousand of them, which was considered a "worst-case" scenario prior to the vote.</p>

<h3>USD - US Dollar</h3><p>Following the FOMC decision yesterday, the USD is exhibiting mixed trading behavior against its major currency peers. Peripheral currencies such as KRW and NOK are causing the USD to trade softer, whereas there are some minor losses against core majors like JPY, CAD, and GBP, and minor gains against EUR and CHF. The DXY has slightly increased from its overnight lows as the market digests yesterday's developments, which include weaker stocks due to ongoing stress in the US regional bank sector and anticipation for today's ECB policy decision. The Fed has most likely ceased its rate hikes after the 10th successive hike and has adopted a data-dependent approach. Although the policy statement stated that various factors would determine whether additional policy firming is necessary, market pricing reflects that no further hikes will be implemented, and significant rate cuts are expected by year-end. The USD is expected to remain soft but is likely close to fair value in broad terms based on current interest rate differentials. A significant rebound is unlikely, and range trading with a soft bias appears probable for the DXY in the near-term.</p><h3>CAD - Canadian Dollar</h3><p>The CAD is showing little change during the session due to several contrasting drivers. Despite softer stocks, a minor gain for crude oil, and steady spreads, they are providing mixed signals for the CAD. Today, BoC Governor Macklem is participating in a "fireside" chat to discuss the challenges and risks of achieving the inflation target. This chat presents another opportunity for the governor to sound hawkish and remind markets that higher rates could still be considered. Furthermore, the market pricing for rate cuts by year-end (which currently reflects more than 25bps in cuts) is not appropriate. The tone of the comments might differentiate from the newly neutral-looking Fed and give short-term spreads a push in favor of the CAD. The comments will be released at 12.50ET, followed by an audience Q&amp;A and a media press conference (14.15ET). Observe the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>Although the EUR remains firm, it has retreated slightly from the 1.11 area, where it peaked yesterday following an overnight test. The ECB is anticipated to increase its key policy rates by 25bps today, raising the deposit rate to 3.25%. At this point, a 1/4 point hike has been fully priced in, and the market is still inclined to bet on the (small) possibility of the ECB being a bit more aggressive. The data from the previous week has likely reduced the risk of a 50bps hike, but there is a definite group of policymakers who believe in the hawkish side of the outlook and think that policy will need to increase further in the coming months. A clear message from President Lagarde that more hikes are imminent should support the EUR, but a highly hawkish message may be necessary to push <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> above 1.11 and towards the 1.12 area currently.</p><h3>GBP - British Pound</h3><p>The money supply data for March in the UK showed a mostly firm trend with stronger demand for consumer credit and stronger mortgage approval data. However, the data also revealed another net outflow from Gilts among foreign investors, which extended the run of net outflows in recent months. Today's UK local elections are unlikely to have a significant impact on GBP, but it is expected that the ruling Conservatives will experience substantial losses, putting investors on alert for a potential change in political direction at the next general election.</p>

<h3>USD - US Dollar</h3><p>The days leading up to today’s FOMC announcement have been rather tumultuous in markets. The emergency takeover by JP Morgan of the collapsing First Republic Bank did not send excessively negative shockwaves across risk assets, but US regional banks have remained under substantial pressure. All this clearly matters for the Fed as it announces monetary policy today. Market consensus suggests a 25bp rate hike which should mark the end of this hiking cycle as the Fed may rely on the impact of financial conditions deriving from the recent banking crisis to deliver the final bit of tightening.&nbsp; We also have some important data to watch today in the US. The ISM services index will be published four hours before the FOMC statement and is expected to have marginally rebounded after March’s drop to 51.2. ADP employment figures will also be monitored (consensus +145k) ahead of Friday’s official payrolls.</p><h3>CAD - Canadian Dollar</h3><p>In the face of declining stocks and oil prices yesterday, the Canadian dollar underperformed. Despite the fact that there hasn't been any action taken today, the US dollar is still strong and is holding above CAD1.3600. Commodity FX is underperforming somewhat on the session. The AUD is the only major currency that is registering a loss on the weak USD on the day so far after it failed to hold much of the gains made on the surprise RBA hike Tuesday.&nbsp; The CAD still largely trades in the shadow of the USD, although it might find some support today if the FOMC does take a more dovish turn. After widening in late April, short-term US/Canada spreads have moderately reduced in favor of the CAD; this could assist limit the potential for CAD losses. The next upside target is the CAD1.3700-30 area. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3>EUR - Euro</h3><p>Yesterday’s eurozone CPI estimates (for April) came in largely in line with consensus, showing a marginal tick-up in headline inflation from 6.9% to 7.0%. Ultimately, the figures have not convinced markets to make any amendments to the consensus European Central Bank call for tomorrow. Most expect a 25bp “compromise” hike, paired with some hints that more increases are on the way. Today, it will all be about news from the other side of the Atlantic: first US data, then the Fed announcement. We think <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> should face some downside risks today, even though our base case is that it should enter tomorrow’s ECB meeting close to the 1.1000 handle.</p><h3>GBP - British Pound</h3><p>The pound will be entirely driven by external factors this week. Today, the Fed may not have a sizeable impact on the pound, and leave it close to the 1.2500 mark. We don’t see a high chance of last week’s highs (1.2580) being tested again very soon. There are no Bank of England speakers due to the quiet period ahead of next week’s policy meeting.</p>

<h3>USD - US Dollar</h3><p>US banking stress continues to simmer as seen by a further rise ($7bn) for the Fed's Bank Term Funding Programme and speculation over First Republic's future. Adding to this defensive stance is the view that the Fed may not be quick to cut rates because of sticky inflation. This brings us to US price data. Yesterday, the 1Q23 US GDP figures revealed a firmer-than-expected core PCE price release. That means today's March core PCE figure could surprise the consensus 0.3% month-on-month estimate to the upside and argues that inflation is remaining more stubborn than feared. Today we will also see the 1Q Employment Cost Index. This is expected at 1.1% quarter-on-quarter and again will be a key input into next week's Fed's decision. The dollar has shown great sensitivity to this price data recently and any upside surprise could trigger further dollar strength against commodity currencies. European FX should remain a little more insulated given a hawkish ECB and some modest improvement in eurozone GDP data.</p><h3>CAD - Canadian Dollar</h3><p>Canada reports February GDP figures. After expanding by 0.5% in January, activity is expected to have expanded by 0.2% in February. After pausing for the past two sessions, the US dollar is taking another leg higher against the Canadian dollar today. It approached CAD1.3670, a new high for the month. Despite a strong beginning in April, the Canadian dollar's outperformance story was ultimately unsuccessful, and its value has returned to its usual range. The US dollar has experienced six consecutive months of fluctuating gains and losses within a narrow trading band, indicating a significant absence of overall direction in the market. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> is consolidating not far from 1.10 as sticky US price data provides something of a pushback to ECB hawkishness. In focus today will be European 1Q23 GDP data. France has already released an on-consensus 0.2% QoQ reading - with the same expected for both Germany and the eurozone a little later. In addition, we will see German April CPI data - expected at an unchanged 7.8%. We doubt this will really change the market's current pricing of a 30bp at next Thursday's ECB meeting. EUR/USD could remain stuck around this 1.10 area.</p><h3>GBP - British Pound</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> is starting to trade in tight ranges under 1.2500 as US inflation data will keep Fed hawks preoccupied. However, Pressure does look to be building for a move higher later in the year. In the UK, the mood music is slightly improving with business confidence edging higher. Warmer relations with the EU seem to be helping the tone. Today the focus will be on US and European data - which can probably leave GBP/USD in a 1.2400-1.2525 range.</p>

<h3>USD - US Dollar</h3><p>Yesterday we considered how the rally in the dollar in the first part of the week appeared unlikely to be sustainable. The recent dovish repricing in Fed rate expectations eventually caught up with the dollar, which sold off across the board yesterday despite global equities remaining under pressure on lingering concerns over regional banks in the US and weak earnings in Europe. Today, data-wise, we’ll see the release of first-quarter growth figures in the US. Most expect a below-consensus 1.5% quarter-on-quarter annualized print. Consumer spending should be strong in line with robust retail sales in January which were boosted by unseasonably warm weather. However, weaker net trade and inventory performance should offset that story. Like any Thursday, some focus will also be on initial jobless claims, which we expect to come in at 250k, in line with consensus.</p><h3>CAD - Canadian Dollar</h3><p>The CAD has traded in a very narrow range against the USD in today's low-volume market. Despite marginal gains against the USD, the CAD is struggling to move out of its shadow amid the decline in crude oil prices and other commodities. According to the minutes from the BoC's April policy meeting, policymakers discussed a potential rate hike due to strong growth and persistent inflation. However, Governor Macklem has indicated that interest rates may increase further to combat inflation, and the minutes did not provide any new insights into the rate outlook. The BoC decided to keep interest rates unchanged and will wait for additional economic data before making a decision in June. The current expectation in the market is that the BoC will maintain this holding pattern through the middle of the year, although there is now a risk of a rate cut later in the year, which the Bank will want to minimize. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>The big rally in <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> yesterday was a testament to how markets seem to favor the euro among other currencies in instances when the dollar falls on the back of Fed dovish repricing and US banking concerns. Market perception is that investors favour currencies that can offer both an ongoing domestic tightening cycle and still some room for a hawkish surprise at the coming meetings. In that sense, the euro is one of the very few currencies that can offer this combination compared to peers. Today, a stabilization around 1.1050/1.1100 seems likely, although a break above 1.1100 could trigger another substantial rally in the pair. On the data side, the eurozone’s calendar only includes the economic confidence data for April, which is not very market-moving.</p>

<h3>USD - US Dollar</h3><p>The USD has slightly increased after declining in early Asian trade, but the overall market sentiment suggests a high level of risk aversion. In Europe, stocks are weaker and US futures have declined by 0.4% for the session. Bank stocks in Europe are not performing well as investors are shifting their attention to the regional bank situation in the US. First Republic shares have sharply dropped by more than 20% in pre-trading due to an "unprecedented deposit" flight and the bank withdrawing guidance last night. European bank stocks have decreased by about 2.5% on the day, indicating another volatile day for the sector. The prices of crude oil and iron ore are also down. It remains to be seen if the bank's concerns can significantly boost the USD, as the gains have been slight. The market will likely perceive a broader problem across the bank sector as an obstacle to the tight Fed policy. There is more data available today, including the Apr Philly and Richmond Feds' manufacturing surveys, housing data, and the Conference Board's Consumer Confidence measure. However, economic news is unlikely to have a significant impact, and primary focus will be on stocks</p><h3>CAD - Canadian Dollar</h3><p>As risk appetite decreases and investors steer clear of commodity FX, the CAD is facing struggles once again. The CAD is being negatively impacted by spreads and falling commodity prices. However, the USD appears to be overvalued, which may hinder its gains in the upper 1.35s, at least in the short term. Since there is no domestic data scheduled, the CAD's performance will be significantly influenced by risk sentiment, financial flows, and technical indicators. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>As risk aversion increased, the EUR retreated slightly from its overnight highs in the upper 1.10s. A second peak in the same range might be worrying for EUR bulls. However, the ECB's hawkish stance, which is keeping its options open for the May 4th policy decision, and the market's prediction of more than 25bps of tightening this morning, suggest that any dips in the EUR should be well-supported at the moment.</p><h3>GBP - British Pound</h3><p>The GBP briefly rose above 1.25 during overnight trading before settling back to trade at around the same level during the session. Despite the recent dip in stocks, the pound has not been grouped with the "riskier" currencies, implying that investors view it differently. Look for the pound to be driven by broader market themes on the day.</p>

<h3>USD - US Dollar</h3><p>The release of quarterly earnings in the US continues to paint a better picture for American corporates, with big tech companies beating estimates yesterday. However, concerns about the US banking sector have returned after First Republic’s shares dropped 49% following the larger-than-expected drop in deposits and announced restructuring plans. Ultimately, a risk-off mood has prevailed, despite the overall contagion effect having been significantly more contained than in previous instances in March. In FX, this still translated into a fully-fledged flight to safety with the recovering ground yesterday. The dollar hasn’t really connected with the dovish repricing in Fed rate expectations, with rate cut expectations that have risen steadily since the end of last week. From 55bp of easing priced in by year-end on Friday to 75bp this morning. We suspect that some help to the dollar momentum shown yesterday would need to come from good US data over the remainder of the week. Ahead of the more important GDP and PCE figures tomorrow and Friday, we’ll take a look at durable goods orders and wholesale inventories today.</p><h3>CAD - Canadian Dollar</h3><p>During this trading session, the CAD's value relative to the USD has remained relatively steady. Short-term spreads between the US and Canada have not fluctuated, and there has been a slight increase in crude oil prices. The CAD has also experienced a decline in value compared to the EUR, causing the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=EUR">EUR/CAD</a> to reach a 1.50 handle for the first time since September 2021. Although the CAD initially outperformed in April, this trend has since diminished. Despite this, the CAD still appears undervalued compared to its fair value estimate, and there is currently limited potential for much more USD upside.</p><h3>EUR - Euro</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> continues to hover around the 1.1000 mark, and we think it can find fresh support above that level if some risk sentiment stabilization offers a chance to reconnect with a favorable rate differential. The eurozone calendar is quite empty and the predominance of news coming from the US on the banking and equity sector leaves EUR/USD even more driven by the dollar.</p><h3>GBP - British Pound</h3><p>The pound moved broadly in line with other European currencies yesterday, and we see room for a recovery as the dollar’s momentum may struggle to last. We see room for the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> to re-test the recent 1.2543 highs by the end of the week in a less unfavourable risk environment, and thanks to the pre-Bank of England meeting hawkish narrative which is still offering decent support to the pound.</p>

<h3>USD - US Dollar</h3><p>The current state of the FX markets suggests that traders are exhibiting caution towards taking risks. The recent gains of the USD seem to reflect market sentiment rather than any notable change in the outlook. It is widely assumed that the Fed is on the verge of completing its tightening cycle, with an anticipated 25bps hike next month. After that, it is expected that the Fed will take a step back, while the ECB and BoE continue to gradually increase their rates over the next few months. However, the potential for USD to increase further appears limited, unless there is a significant extension of the Fed hike bets or a reversal in ECB tightening expectations. The challenges for the USD remain apparent, and the market is pricing in an aggressive rate cut by the Fed into 2024 compared to the ECB and BoE. Moreover, the looming debt ceiling issue could negatively impact the USD sentiment during the summer period.</p><h3>CAD - Canadian Dollar</h3><p>The CAD, along with other commodities, is experiencing a decline and is likely to end the week with a weak finish, falling above the 1.35 mark. The weakening of the CAD is a result of a wider gap in US-Canada spreads this week and lower oil prices, which have retreated to pre-OPEC+ supply cut levels. Governor Macklem remarked that the CAD has already factored in the higher rates in the US in compared to Canada, as reflected in its current value. This implies that the CAD has limited potential for upside, based on the policy divergence. The CAD is struggling to maintain a strong position, and investors remain pessimistic. Canada is scheduled to release its February Retail Sales data at 8:30 AM ET, and it is expected that sales will decrease by 0.6% during the month. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>Despite the USD's efforts to gain strength, the EUR has remained relatively robust. The initial PMI data for April in the Eurozone showed mixed results, as the manufacturing activities in France and Germany weakened. However, there was much better-than-anticipated growth reflected in both the services and composite data. The Composite PMI for the Eurozone increased to 54.4, surpassing the anticipated 53.7, indicating that growth might be gaining further momentum, thereby supporting the expectations of additional rate hikes by the ECB in the future.</p><h3>GBP - British Pound</h3><p>The GBP has shown some weakness against both the USD and EUR after a series of mixed data reports from the UK. In March, Retail Sales fell more than anticipated at 0.9% month-over-month. However, the preliminary PMI data for April, mostly positive, showed that while manufacturing activity has softened, both Services and Composite data were considerably better than expected. This suggests that growth momentum is slowly picking up in the UK, supporting the outlook for more tightening by the BoE in the upcoming months.</p>

<h3>USD - US Dollar</h3><p>Yesterday’s release of the Fed's Beige Book ahead of the 3 May FOMC meeting showed no material weakening in activity after the failures of two US banks in early March. Several Fed districts noted tighter credit conditions but not any significant weakening in activity. The report should not interfere with the market's 89% probability pricing of a 25bp Fed hike on 3 May and does not seem to provide much fuel yet to the bearish dollar narrative. For today, all the Fed speakers are after the European close and the market will have second-tier data to digest including weekly initial jobless claims and existing home sales.</p><h3>CAD - Canadian Dollar</h3><p>The US dollar is edging higher against the Canadian dollar. It is rising for the fourth session in the past five and reached a high of 1.3480 overnight.&nbsp; The next technical hurdle is seen in the CAD1.3500-20 area. Inflation data fell in line with expectations earlier this week slipping to 4.3% in the March year. The “no rate cut this year” messaging from the BoC since last week’s policy decision seems to be resonating with markets; swaps are pricing in much less risk of a rate cut in the coming months, with the Dec implied policy rate priced around 4.40%. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD’s</a> attempt to correct lower proved short-lived yesterday despite broad risk-off and higher rates across the board. Unchanged Eurozone CPI for March was shrugged off as the domestic macro news flow is set to pick up towards the end of the week. Friday’s flash PMIs will be eagerly awaited for insight and direction. EUR/USD rate spreads still remain at the mercy of a reality check with regards to the Fed prospects, as we continue to see any rate cuts embedded for the end of the year as premature. This leaves EUR/USD’s balance of risks tilted to the downside for the near term.</p><h3>GBP - British Pound</h3><p>Yesterday's release of higher-than-expected March UK inflation has seen the pricing of the Bank of England cycle push up to a new cycle high. The market now prices the current 4.25% Bank Rate being taken close to 5.00% by November. The BoE may not choose to push back against this pricing until the 11 May rate meeting - where a 25bp hike looks likely. Tomorrow we see the release of March retail sales and the April PMI numbers - which could shed light on how the economy is coping with higher rates. <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> could creep back to 1.2500 should any of today's US data add to some early indications of a slowing US economy.</p>

<h3>USD - US Dollar</h3><p>The US dollar has continued to trade at weaker levels after initially suffering a sharp sell-off yesterday in response to the release of the latest US CPI report for April. US rates have corrected lower again in response to market participants scaling back expectations for further Fed rate hikes and pricing in more cuts later this year. While the monthly rates of headline and core inflation were broadly in line with expectations in the April US CPI report, the underlying details provided further encouragement that inflation pressures are easing. It was the weakest monthly reading since July 2022, and has further slowed the annualized rate of growth to 4.1% over the last six months down from a peak of 7.8% in the six months to June of last year. The Fed’s latest updated policy guidance has stressed that the upcoming policy decisions will be more data dependent. The CPI report supports the US rate market expectations that the Fed should keep rates on hold in June.</p><h3>CAD - Canadian Dollar</h3><p>The US dollar has found a base in the CAD 1.3300-35 area. It has pushed a little above yesterday's CAD 1.3415 high. A move above the CAD 1.3435 area would re-target CAD 1.3500. Looking ahead, we don’t expect the loonie strengthen too much more. We expect the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> to range trade between 1.33 -1.38 in the coming quarters.</p><h3>EUR - Euro</h3><p>European Central Bank speakers are the only highlight in an otherwise empty calendar in the eurozone in the second half of the week. The latest ECB remarks have not had a huge impact on the euro. After all, a 25bp hike in June is highly likely after President Christine Lagarde explicitly said the ECB is not pausing, and it is almost fully priced in; beyond that, there is around 22bp of additional tightening embedded into the EUR. <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> remains a dollar – and primarily a US debt ceiling – story for now. There are downside risks that could extend below the 1.0900 in the coming days as a resolution to the debt-ceiling chaos may still follow a bumpy road.</p><h3>GBP - British Pound</h3><p>Markets approach the Bank of England decision day with rather aggressive pricing on future rate hikes. A 25bp move is fully priced in today, although the markets expect nearly two more 25bp increases before reaching the peak around September/November. From an FX perspective, we do not expect this meeting to be a game-changer for sterling. We acknowledge that part of GBP’s recent strength has been due to the market’s aggressive expectations about BoE tightening. <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> may stabilize around 1.26 for now.</p>

<h3>USD - US Dollar</h3><p>The impasse over the US debt ceiling increase is emerging as an increasingly short-term supporting factor for the dollar. A meeting between President Biden and Congress Republicans did not yield much progress on a potential agreement, and while Republican leader Mitch McConnell dismissed the risk of a US default, he admitted the negotiations were at a stalemate. For now, a short-term debt-limit extension, which would be the quickest solution, has been ruled out. Today the US will see the release of the April inflation report. Market consensus suggests a marginal deceleration of core CPI from 5.6% to 5.5%. Today’s inflation may also contribute to putting a floor under the dollar in the near term, even though we remain resolutely bearish on the greenback for the second half of the year.</p><h3>CAD - Canadian Dollar</h3><p>The greenback is trading quietly in a CAD 1.3370-CAD 1.3400 range, just inside yesterday's range. The pair has taken a break from this week’s low of near CAD1.3315. On the upside a move above CAD 1.3415 may signal a range extension toward CAD 1.3450. There’s not much happening domestically leaving the pair to trade on broader market themes. Observe the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>We have not seen the euro score towards the bottom of the G10 daily scoresheet without a strong idiosyncratic event recently. The the common currency is around 2.5% higher against the dollar this year, and only GBP has performed better so far this year (in the G10). We attribute yesterday’s euro underperformance to some position-squaring. There isn’t much in terms of domestic news leaving the euro to be driven by news from the US. There are lingering downside risks for <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a>, which might extend to 1.0900 today.</p><h3>GBP - British Pound</h3><p>The pound showed very good resilience yesterday despite a destabilised risk sentiment and an appreciating dollar. This may boil down to markets holding on to some long GBP positions ahead of the Bank of England announcement tomorrow.&nbsp; A good part of the pound’s outperformance relies on the market’s hawkish expectations on the BoE, with 70bp of tightening still priced in this year. In our view, there are good chances this week will mark the last rate hike of this cycle.</p>

<h3>USD - US Dollar</h3><p>Two weeks away from the FOMC May announcement, and markets are now fully almost fully pricing a rate hike (22bp), but the dollar is struggling to lay the basis of a sustainable recovery. Today’s US data calendar is not very busy: MBA mortgage applications and the Fed Beige Book are the only two highlights after yesterday’s housing figures for March came in mixed (housing starts were better, building permits worse than expected). The lack of clear catalysts may leave the dollar positioning slightly tilted to the downside given lingering vulnerability to a potential improvement in risk sentiment now that the May Fed hike is fully priced in.</p><h3>CAD - Canadian Dollar</h3><p>Canada reports March CPI today. The base effect warns of a further slowing. Canada's CPI surged 1.4% last March while the median forecast in Bloomberg's survey projects a 0.6% rise last month. The Canadian dollar is recovering from yesterday's decline. However, like a few of the other major currencies, it recovered about half of what it lost Friday-Monday and stalled. The US dollar tested the 1.3360 area, where it found bids in Europe. The intraday momentum indicators have turned up and there is initial potential back to the 1.3400 area. Look for the loonie to drive direction directly from today’s CPI print. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> is struggling to find clear direction this week, probably lacking a big fresh driver to stage a sustained rally beyond 1.1000 whilst staying supported thanks to a softish dollar environment. There are some data releases worth monitoring in the eurozone this week, but the euro has not shown great reactiveness. Yesterday’s ZEW surveys in Germany were mixed, with expectations dropping sharply but the current situation index recovering much more than expected. This morning, we’ll see March’s final CPI figures for the euro area as well as current account figures. Markets are pricing in 30bp of tightening in May, and a total of 82bp by October. The trading range for the pair may narrow further around 1.09/1.10 in the coming days.</p><h3>GBP - British Pound</h3><p>UK data has continued to point to resilience in inflation and markets are increasingly inclined to bet on Bank of England tightening. Yesterday’s surprise pickup in wages was followed by above-expectations inflation figures this morning. The March report showed headline inflation decelerating from 10.4% to 10.1% versus an expected 9.8% reading, with the core rate holding steady at 6.2%. In light of this data, a 25bp rate hike by the Bank of England looks more likely. Markets are pricing in 23bp of tightening in May, and 60bp in total before reaching a peak.</p>

<h3>USD - US Dollar</h3><p>The USD is trading mixed to slightly lower as the week closes, with a sharp decline this week due to easing inflationary pressures. The DXY is trading just below its January low of 100.82. A potential low close for the week could signal further losses ahead for the USD. Today's economic calendar poses another challenge with upcoming data releases like Import Prices, Industrial Production, and U. Michigan Consumer Sentiment figures. However, the most significant risk for the USD is the expected 0.4% month-on-month decline in Retail Sales data for March. Recent weakening of US data surprises and consumer sentiment may lead to a downside surprise in these crucial data points, further impacting sentiment towards the USD.</p><h3>CAD - Canadian Dollar</h3><p>The USD has lost nearly 1.5% against the CAD this week, with spot consolidating around the low 1.33 range overnight. The CAD has gained strength against the USD due to yield spread compression, firmer crude oil prices, and a rebound in commodity prices. Seasonality and positioning may also be contributing to the CAD's gains. These factors are expected to persist in the short term, potentially pushing gains towards the 1.32 level in the next couple of weeks. BoC Governor Macklem is expected to reiterate a "no rate cuts this year" message during his press conference in Washington today, as swaps are still pricing in a 25 basis points ease by year-end despite his previous statement. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>ECB Governor Knot recently stated that he has not yet decided whether the ECB should hike rates by 50 basis points (bps) in May or scale back to 25 bps. This indicates that there is still uncertainty surrounding the ECB's next steps. Market pricing currently leans towards the possibility of a larger rate hike. Notably, market pricing suggests that ECB hikes may continue later into the year and remain at elevated levels, which could support the narrowing of short-term rate spreads between the EUR and USD.</p><h3>GBP - British Pound</h3><p>The GBP has slightly weakened against the USD overnight, potentially due to losses on the crosses as <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=GBP&amp;from=EUR">EUR/GBP</a> continues to rise towards the mid-0.88s. However, the cross is expected to end the week on a relatively strong note. Despite this, overall trends for the GBP remain positive and are anticipated to continue. There were no significant data reports from the UK this morning. BoE (Bank of England) Governor Bailey is currently in Washington for the IMF spring meeting and is scheduled to meet with US Treasury Secretary Yellen later. Market pricing indicates an approximately 80% chance of a 25 basis points hike at the May 11th policy decision by the BoE.</p>

<h3>USD - US Dollar</h3><p>The US dollar is trading weaker against other major currencies after yesterday's US Consumer Price Index (CPI) data, which pushed the US Dollar Index (DXY) towards its lowest level since early February. European stocks are trading without much change, while US equity futures are slightly stronger. Major bond markets are slightly weaker. The decline in the USD gained momentum during early European trading, although there doesn't seem to be any specific catalyst for the movement. Rather, investor sentiment appears to be driven by the belief that the Federal Reserve's tightening cycle may have limited room to continue, while interest rate hikes in Europe could be extended and remain higher for a longer. Investors may also be anticipating positive news from the upcoming US Producer Price Index (PPI) report, which is expected to show a slowdown in both headline and core measures of inflation. Softer price data would reinforce the market's perception that the peak of the Federal Reserve's rate hike cycle is approaching.</p><h3>CAD - Canadian Dollar</h3><p>The Bank of Canada's rate decision met expectations, with the central bank extending the conditional pause at 4.50%. Policy makers expressed increased optimism that a severe economic downturn could be avoided and that inflation was declining. However, the timeline for prices to slow down to the 2% target was less clear, and the Governor took the opportunity to emphasize that policymakers had discussed the likelihood of keeping policy rates higher for longer to combat inflation. In fact, the Governor outright stated that rate cuts, as implied by market pricing for the year-end, did not seem to be the most likely scenario. The BoC’s press conference appeared to be focused on pushing back against market expectations of a rate cut by year-end and maintaining pricing for a policy rate of 4.25% in December. Additionally, the Canadian dollar was modestly supported by firmer crude prices, which are being extended by the OPEC+ supply cuts, adding tailwinds to the CAD, currently trading at around 1.34. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>Officials at the European Central Bank (ECB) continue to express concerns about inflation. Austrian policymaker Holzmann, known for his hawkish stance, has suggested that a 50 basis point hike could be possible in May. Meanwhile, Villeroy, who is typically considered more centrist and measured, has noted that inflation appears to be more widespread and potentially more persistent. Villeroy also stated that the ECB's tightening cycle is nearly complete, but hinted that further rate hikes may still be necessary in the future. A Reuters report today indicates that policymakers are "converging" on a 25 basis point hike next month, according to anonymous sources.</p><h3>GBP - British Pound</h3><p>Activity data for the UK in February showed a general weakness. GDP remained flat in the month, falling short of expectations for a 0.1% gain. Industrial production also declined by 0.2%, and service sector activity saw a drop of 0.1%. While this data suggests that the UK may avoid a technical recession, the prospects for growth remain dim. Despite the current participation of the GBP in the broader rally against the USD, the weak growth trends are likely to limit the Bank of England's (BoE) willingness to significantly raise interest rates from their current levels.</p>

<h3>USD - US Dollar</h3><p>Core US CPI has been one of the biggest FX movers over the last 12 months and today's March release is expected to show another sticky 0.4% month-on-month reading. Sticky inflation is probably the biggest risk to the consensus views in the FX. Today&nbsp; also sees the release of the 22 March FOMC minutes, where the Fed pushed ahead with a 25bp hike after recently announcing new dollar liquidity programmes. Undoubtedly there will be a lot of noise in the minutes and it is unclear what they will mean for current market pricing of a final 25bp hike in May (75% priced) and a subsequent 60bp easing cycle by year-end. Expect USD to be driven by any surprises on the March CPI today and the sharper reaction (risk negative, dollar rally) would probably come on an upside surprise.</p><h3>CAD - Canadian Dollar</h3><p>The Bank of Canada announced a conditional pause in late January, and although the economy has begun the year a little stronger than it expected, there is no compelling reason to expect it to move today. The target rate is at 4.5%. March CPI will be reported next week. In February, it was 5.2%. It peaked at 8.1% last June. The Bank of Canada forecast its it to fall to 3.6% this year and 2.3% next year. From an FX perspective, the US dollar slipped to CAD1.3450, a four-day low. It has spent little time above yesterday's settlement (~CAD1.3465). Session highs, so far, were recorded in the Europe near CAD1.3470. The next important support area is near CAD1.3400. On the upside, the greenback faces resistance in the CAD1.3500-25 band. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>EUR/USD is enjoying some gentle support as investors return from their Easter break. US core CPI will be the key event of the day and will determine whether <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> has a chance of breaking above 1.10. Apart from the US CPI, look out for several European Central Bank speakers today. The mood seems to be that inflation remains sticky, meaning that expectations for a further 50-75bp of ECB tightening this year will hold. EUR/USD to trade a 1.0900-1.0950 range into the pivotal US CPI release</p><h3>GBP - British Pound</h3><p>The main focus for sterling markets in the near term is whether the Bank of England (BoE) will push ahead with one last 25bp hike on 11 May. This would take the Bank Rate to 4.50%. The market prices an 80% chance of such an outcome. Providing insights into the latest BoE thinking will be Governor Andrew Bailey, who speaks in Washington today. There is a risk that he hints at a pause, having seen fellow central bankers in Australia and Canada do so over recent months. We see 1.25 as a strong barrier for <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> especially if the BoE governor gives a nod to a pause in May.</p>

<h3>USD - US Dollar</h3><p>Ahead of a long weekend for many, markets are trading with a mildly defensive tone. European stocks are mostly flat to slightly firmer, while US equity futures are flat to slightly weaker. Bonds are mostly firmer, and crude oil has dipped slightly. US weekly claims data will be released at 8:30 ET, and Bullard will speak at 10:00 ET, who has previously expressed the view that the Fed needs a policy rate above 5%. However, Bullard is not a voter this year. US NFP data will be released on Friday, with most US markets closing early for the long weekend.</p><h3>CAD - Canadian Dollar</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> has traded within the 1.34/1.35 range this week. Canada's upcoming employment report is expected to show a modest gain in jobs, with forecasts ranging from +7.5k to +40k, and a potential slight increase in the unemployment rate from 5.0% to 5.1%. Hourly wage growth may remain elevated and may potentially pick up from February's 5.4% gain to regain 5.5%. The recent Business Outlook Survey indicated some softening in the labor market and wage pressures, but with over half of respondents planning to increase hiring in the next 12 months. Policymakers may have concerns about elevated wage growth, as it could be inconsistent with regaining control of inflation unless accompanied by significant productivity gains in the domestic economy.</p><h3>EUR - Euro</h3><p>Yesterday, the EUR/USD pair experienced a sharp reversal from its high of 1.0970, despite the US services ISM showing a significant decline and a drop of 11 basis points in short-dated US yields. Interestingly, the two-year differential between EUR and USD swap rates is narrowing and approaching levels last seen in early March. This price action confirms our expectation for EUR/USD performance in the upcoming quarter. Despite the negative macroeconomic factors affecting the US dollar, we anticipate that the challenging risk environment could keep EUR/USD fluctuating within a range of 1.05-1.10. we expect <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> to hover around the 1.0900 level today.</p><h3>GBP - British Pound</h3><p>As the UK long weekend approaches, the Pound is drifting with overnight losses close to yesterday's low, aligning with technical indicators that suggest support for the pound. UK Construction PMI data for March came in slightly weaker than forecasted, with the index hovering around the 50 marker for the past few months due to the slide in the UK housing market. Short-term range trading is expected today ahead of the long weekend.</p>

<h3>USD - US Dollar</h3><p>The US dollar is experiencing mixed to slightly stronger trading against its major currency counterparts in a relatively calm market environment. The upcoming Easter holiday may be contributing to the subdued activity, but the USD still appears to be weak and susceptible to further losses. The recent release of second-tier US economic data, which included Factory Orders revisions and JOLTS numbers, did not have a significant market impact but added a bit of pressure on the USD. This reaction highlights investors' sensitivity to the outlook for Fed policy and, increasingly, how quickly US rates will decrease. Narrowing interest spreads are negatively affecting the USD overall, indicating some downside risk (1-1.5%) from current levels. The ADP private sector jobs report for March is due at 8:15 ET, with markets expecting an increase of 210k. Trade data will be released at 8:30 ET, followed by final Services PMI data at 9:45 ET, and the ISM Services data at 10:00 ET, which is expected to show minor slowing in growth. Additional weak US economic reports today may further pressure the USD lower ahead of Friday's NFP data release.</p><h3>CAD - Canadian Dollar</h3><p>The Canadian dollar (CAD) has not been able to gain further ground above the 1.34 level despite a generally weaker US dollar this week, resulting in a slight decline from this week's highs. There have been no major changes, as the US/Canada interest rate spreads remain close to recent lows, and crude oil prices remain strong. The CAD may be under some pressure due to slight weakness in US equity futures, but based on its current valuation, the CAD still appears relatively undervalued compared to fair value estimate. Additionally, seasonal trends are favorable for CAD in April, and the broader headwinds affecting the USD suggest limited potential for <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> to rally at this time.</p><h3>EUR - Euro</h3><p>During quiet overnight trading, the EUR remained relatively unchanged. However, the fact that the currency is consolidating above the high from late February/early March suggests that there is strong underlying support for the EUR. In February, German Factory Orders rose by a significant 4.8%, while French Industrial Production increased by 1.2% in the same month. Although the final Eurozone Services and Composite PMI data for March indicated slightly slower growth, overall data trends in the Eurozone support the notion that the economy has avoided a recession. This positive development may allow the ECB to raise rates slightly and potentially maintain restrictive policies for a longer period.</p><h3>GBP - British Pound</h3><p>The final data for UK Services and Composite PMI showed little change from the preliminary data, with the Services activity revised up by a tenth to 52.9. This development supports the notion that the UK economy managed to avoid a recession in the early part of the year, even though growth trends remain sluggish. Prospects for a rate hike are favorable for <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP</a>. The market is currently pricing in an 80% chance of a 25bps increase in the BoE policy rate at the May 11th meeting, but only modest declines in the policy rate are expected for the remainder of the year.</p>

<h3>USD - US Dollar</h3><p>The dollar index is now around 3% below its peak of mid-March. Actions by the Fed to address dollar money market stress have allowed investors to (correctly) draw the conclusion that tighter credit conditions make a US hard landing and a sharp Fed easing cycle more likely - a cleanly bearish story for the dollar. Today sees the release of US Jolts Job Opening data for February. A sharp decline here would probably be read as a mildly bearish dollar factor - adding support to the 2H23 Fed easing cycle.</p><h3>CAD - Canadian Dollar</h3><p>The Canadian dollar is higher for the seventh consecutive session. The greenback was testing the CAD 1.38 level as recently as March 24 and now it is testing the CAD 1.34 area. The combination of the increased government spending, higher oil prices and a firm S&amp;P 500 appear to be spurring a short-covering rally in the Canadian dollar. For today, there are not any major domestic drivers, leaving the CAD to trade on broader market themes. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>EUR/USD remains well supported and not far off recent highs at 1.0900/0930. It seems investors are happy to differentiate between the health of the banking sectors in the US and Europe. Calming tensions in US money markets is allowing for a refocus on narrower <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> rate differentials - having narrowed around 50bp since early March. There is not much Eurozone data today, but a further decline in PPI - expected at 13.3% YoY in February - would be welcome. Overall, we suspect that the market will be reluctant to chase EUR/USD above 1.10 yet given concerns about the regional US banking system. That said, a higher EUR/USD certainly looks the direction of travel for the rest of the year.</p><h3>GBP - British Pound</h3><p>The pound continues to perform well and is certainly taking advantage of a weaker dollar. <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> is now approaching strong resistance in the 1.2450/2500 area. These levels could be tested today should the US data come in on the soft side. Domestically, the market will be interested in a speech from Bank of England Chief Economist Huw Pill. Should Pill choose to play up the welcome signs of easing constraints in the UK labor market, expectations of future BoE tightening may dwindle and the pound should weaken.</p>

<h3>USD - US Dollar</h3><p>FX is being driven by diverging monetary policy paths in the US and Europe while swings in the equity market continue to prove unusual. The dollar’s safe-haven status has perhaps been dented by the fact that the banking turmoil has primarily been a US story. Oil-sensitive currencies continue to enjoy decent momentum as we see more upside risks to oil prices. The Canadian dollar is also benefiting from the general improvement in sentiment but lacks a domestic tightening story, so its rally may start to run out of steam sooner rather than later. Today’s calendar sees the third release of fourth-quarter GDP figures, plus speeches by the Fed's Thomas Barkin, Susan Collins and Neel Kashkari.</p><h3>CAD - Canadian Dollar</h3><p>The CAD has been on a mini-run against the USD and continues to hold on to gains through the week. The Federal budget came and went without much impact on the CAD. More spending and more debt are the very basic takeaways. Look for the CAD to possibly target 1.3515 in the short term.&nbsp; For now the CAD is likely to be driven by broader external market themes instead of any internal domestic drivers. Observe&nbsp;the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>Preliminary March inflation readings in Spain and Germany will be closely watched today. The German figures will obviously draw greater interest, and consensus expectations are for a deceleration from 8.7% to 7.3% in the headline rate. With the European Central Bank explicitly data-dependent, this week’s inflation figures are set to be an important driver of the market’s rate expectations. There are currently two 25bp rate hikes fully priced in by September, and the bar for another hawkish repricing is set quite high. The <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> rally took a break around 1.0840 and we could see it hover around those levels today, but we still favour a break above 1.0900 and ultimately a test of 1.1000 in the near term.</p>

<h3>USD - US Dollar</h3><p>The dollar bounce yesterday was the result of some position-squaring and below-consensus data, while the still unstable risk environment caused by recessionary fears and the US debt ceiling stalemate keeps creating a breeding ground for more defensive positions in FX. On the data side, jobless claims surprised on the upside and PPI to the downside yesterday – both adding to rate cut bets – while today’s focus will be on the import price index and the University of Michigan inflation and sentiment gauges. FOMC member Mary Daly is scheduled to speak this evening.</p><h3>CAD - Canadian Dollar</h3><p>The greenback jumped almost 0.9% yesterday against the Canadian dollar, the most in two months. The 2.3% slide in WTI appeared have weighed on the Canadian dollar amid the broader US dollar gains. The US dollar briefly above CAD 1.3500. The <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> is likely to be driven by the USD and broader market themes.</p><h3>EUR - Euro</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> continues to follow primarily USD dynamics, and a quiet calendar in the eurozone (final CPI reads are not normally market-moving) means this should continue to be the case today. For now, the USD appreciation was not enough to trigger a break below 1.0900 in the pair, but the lack of some encouraging news on the US debt ceiling story means – in our view – that 1.0900 will hardly prove to be a sturdy support for much longer. On the ECB side, we’ll hear from Germany’s Governing Council member Joachim Nagel. ECB speakers have had a limited impact on the euro after the latest ECB meeting and this should not change for now.</p><h3>GBP - British Pound</h3><p>As we expected, the Bank of England’s 25bp rate hike did not have any major implications for GBP. The drop in GBP yesterday was almost entirely due to the USD rally and was in line with the move in other dollar crosses. The BoE retained its flexibility and kept the door open for more rate hikes if inflation proves persistent. While we don’t exclude one final June hike, most analysts suggest that we have reached the peak of the BoE tightening cycle as inflation will start to rapidly decelerate this year. From an FX perspective, there aren’t many convincing reasons to call for GBP underperformance against its main peers in the near term.</p>

<h3>USD - US Dollar</h3><p>Positive news emerged from the recent high-level meeting between President Biden and Congress Speaker Kevin McCarthy, despite significant differences between the two sides. However, markets are pessimistic as they expected more substantial progress towards a deal. In the foreign exchange (FX) market, the dollar is strengthening as anticipated, but further appreciation is possible once there are clearer signs of progress in debt-limit negotiations. Today, the focus is less on data, and only housing numbers for April will be released, which could be dampened by the decline in mortgage applications.&nbsp;</p><h3>CAD - Canadian Dollar</h3><p>The Bank of Canada's conditional pause in late January has sparked speculation that it may need to raise rates again, as the economy remains resilient and price pressures remain strong. April's CPI increased by 0.7%, surpassing expectations. From January to April, Canada's CPI has risen at an annualized pace of 6.3%. Currently, the overnight target rate stands at 4.50%, with a 75% chance of another quarter-point hike already priced in, while expected rate cuts by year-end have been reversed. The US dollar bounced off the CAD 1.3400 area yesterday, settling near CAD 1.3480. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3>EUR - Euro</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> is under pressure again this morning and we stress how 1.0800 is probably a key benchmark level to gauge market sentiment about the US debt-ceiling story. We could see some support at 1.0800, a break lower could indicate the FX market moving more seriously to price in a US default. The domestic story for the euro has been immaterial and the decline is almost entirely driven by the dollar. Today, we’ll see the final print of the eurozone’s CPI figures for April and we’ll hear from a plethora of ECB speakers.&nbsp;</p><h3>GBP - British Pound</h3><p>GBP has started to edge lower and we expect more downside room against both the USD and EUR. A slowdown in wage growth was one of the two pieces of information the BoE needed to pause its tightening cycle in June, the second one will be some deceleration in inflation (data out on 24 May). Several analysts are calling for a June pause, and given 20bp of tightening are priced in, there is ample room for GBP to be hit by a dovish re-pricing. There are no market-moving data releases in the UK today.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="margin-left:0px;"><span lang="EN-CA" dir="ltr">The USD is moderately stronger today, but market sentiment remains cautious due to the US debt ceiling issue, which is currently in the spotlight. Republicans are not in a rush to reach an agreement, and some are skeptical about Treasury Secretary Yellen's proposed timeline for the June deadline. This political maneuvering suggests increased uncertainty in the coming weeks as negotiations approach. Concerns about the Chinese economy's momentum have also impacted local stocks and industrial metals like copper and iron ore. Global stocks have seen significant declines, while bonds have received some support. The release of the FOMC minutes from the May policy decision will provide insights into the rate hike to 5.25% and clarify whether the Fed sees themselves as "not far off" or already "sufficiently restrictive," as Chairman Powell indicated in his post-meeting comments.</span>&nbsp;</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="margin-left:0px;"><span lang="EN-CA" dir="ltr">The CAD is slightly weaker due to weak risk appetite and significant losses among commodity peers. However, it remains within its established range. There is a possibility that the recent sideways trading range could eventually transition into a more dynamic phase of market movement. Our forecast suggests further range trading around 1.35 for spot prices until the end of Q2, but we anticipate a longer-term improvement in the CAD as risk appetite improves in the second half of the year, especially if there is a potential decline in US interest rates. Furthermore, the overall negative sentiment towards the CAD seems to be moderating as US/Canada yield spreads narrow and concerns about a correction in the resilient domestic housing sector appear exaggerate</span><span style="font-family:&quot;Calibri&quot;,sans-serif;"><span lang="EN-CA" dir="ltr">d. </span></span><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">Observe the&nbsp;</span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">&nbsp;trends.</span></p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="margin-left:0px;"><span lang="EN-CA" dir="ltr">Germany's May IFO survey aligns with the weakness observed in the industrial sector as indicated by this week's PMI releases. The overall business confidence reading declined to 91.7 from a revised 93.4, falling short of the expected 93.0 outcome. This marks the first significant setback for the index since October. Despite this, ECB policymakers are unlikely to back down from their plans to raise rates. The recent hawkish comments, strongly suggesting further tightening measures in the future, could potentially slow down the EUR's recent decline against the USD.</span></p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="margin-left:0px;"><span lang="EN-CA" dir="ltr">UK April inflation data exceeded expectations by a significant margin. Headline prices increased by 1.2%, surpassing the forecast of 0.7%, while core inflation accelerated to 6.8% from 6.2% in March. The GBP initially surged against the USD as markets priced in the likelihood of more tightening by the Bank of England (BoE). However, it subsequently experienced a sharp decline, reaching new session lows around 1.2375/80, as investors became concerned about the potential economic impact of further rate increases. BoE tightening expectations have been adjusted, with swaps now reflecting approximately 75 basis points of tightening in the coming months.</span>&nbsp;</p>

<h3>USD - US Dollar</h3><p>The upward momentum of the USD continues amidst uncertainties surrounding the US debt ceiling, a relatively stable-to-weakening stock market, and increasing US yields. Speaker McCarthty expressed optimism regarding the possibility of reaching a debt agreement before June 1. The recent downgrade of the US's AAA rating by Fitch, based on fair value estimate models, may have motivated both parties to be more inclined towards reaching a consensus. The minutes from yesterday's <a target="_blank"  href="https://www.mtfxgroup.com/fx-daily/usd-edges-higher-after-release-of-fomc-minutes/">FOMC meeting</a> did not provide substantial guidance for the markets, indicating that policymakers themselves have a significant level of uncertainty about future actions. The issue of the debt ceiling likely influenced the language used, hinting at a potential pause in June but keeping the possibility of resuming interest rate hikes in July open. Today's schedule includes more speeches from Federal Reserve officials, while recent data on weekly claims in the US labor markets have shown some signs of softening.&nbsp;</p><h3>CAD - Canadian Dollar</h3><p>The wider, sideways trading that has characterised spot movement over the past few months is still present as the CAD continues to range trade against the USD. In the past month or two, the CAD has gained some momentum on the crosses, riding the recent recovery in the USD against the majors; a slightly firmer tone has also emerged against the EUR and GBP. That could signal a modest shift in the CAD's potential relative to the USD, and we do observe that the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> is now trading at levels that are somewhat over what we would consider to be spot fair value (1.3291). This may restrict the USD's ability to rise above 1.36.&nbsp;</p><h3>EUR - Euro</h3><p>The German economy contracted for a second consecutive quarter in Q1 after contracting in Q4 according to (adjusted) GDP figures, indicating that the country entered a recession after the turn of the year. Initial projections showed little growth in Q1. Although inflation is still the ECB's major worry, weak economic dynamics won't stop the central bank from proceeding with additional rate hikes in the coming months. Softer than expected statistics have added to the headwinds facing the euro.&nbsp;</p><h3>GBP - British Pound</h3><p>GBP has performed better than average for the session. The UK's energy bills are expected to drop significantly, which is good news for the pound. A 17% decrease in average home energy costs is predicted by new price cap standards, providing some relief from the pinch caused by rising cost of living.&nbsp;</p>

<h3>USD - US Dollar</h3><p>The USD is declining as markets gain momentum after a slow trading day on Monday. The decrease in the USD's value is evident across the G10 majors, while global stocks remain stable or slightly stronger. Bond markets are performing well due to the apparent resolution of the debt ceiling issue, which is increasing risk appetite and negatively affecting the USD. Although there may be a slight increase in USD demand from month-end flows, investors are primarily focused on policymakers' actions in the upcoming weeks, as it will impact the direction of the foreign exchange market. The FOMC is expected to skip the June 14th decision and reassess in July. This morning, there is significant data on housing, consumer confidence, and regional activity in the US. China will release PMI data tonight.&nbsp;</p><h3>CAD - Canadian Dollar</h3><p>The Canadian dollar (CAD) is showing some strength in the trading session but remains near yesterday's high against a generally weaker US dollar (USD). The decrease in US yields may contribute to additional spread compression, which is supportive of the CAD. However, the CAD faces challenges from generally soft commodity prices (WTI is trading around 2% lower), which hampers its potential for appreciation due to weak terms of trade. The CAD's upward potential may be limited to the low to mid 1.35s in the near term. Canada will release Q1 Current Account data at 8.30 ET. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3>EUR - Euro</h3><p><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> has quietly slipped below support at 1.0700/1.0720 and may be making its way to the March lows at 1.0515/0530. For today, the eurozone focus will be on the release of industrial and consumer confidence figures for May. Consensus expects some further deterioration here and if so this should keep EUR/USD on the soft side. We will also hear from a raft of ECB speakers today. Expect more hawkish rhetoric especially in advance of the May eurozone CPI data on Thursday. &nbsp;</p><h3>GBP - British Pound</h3><p>Money markets now price 100bp of Bank of England tightening by November. This would put the Bank Rate at 5.50%. UK data will do most of the talking and it will probably be the jobs/wages data (13 June) or the May CPI data (21 June) which will be the key determinant on whether the market reins in aggressive tightening expectations. Until then support around the 1.2275/2300 area may hold temporarily.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p>Once again, the US dollar is recovering and making slight gains against major currencies in the G10 group. As concerns about the debt ceiling diminish, US Treasury yields are decreasing, while hawkish statements from Federal Reserve officials are reinforcing the possibility of a June interest rate hike, although expectations are cautious. Richmond Fed President Barkin acknowledged the restrictive nature of current policies but expressed concerns about high inflation and the need for clearer signs of diminishing demand. Mester, on the other hand, stated that there was no justification to pause the process of tightening monetary policy. Both Barkin and Mester are voting members of the Federal Open Market Committee (FOMC) this year, and the pricing for the June FOMC meeting has remained relatively stable, with around a 16 basis points increase factored in. Now that the debt ceiling issue seems to be mostly resolved (after clearing the House Rules Committee hurdle yesterday, a vote in the House is expected today), market focus will shift to the release of the May Non-Farm Payrolls (NFP) report on Friday. While the consensus forecast stands at 195,000, market expectations lean slightly towards higher print.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p>The Canadian dollar (CAD) is facing downward pressure, reflecting the broader gains made by the US dollar (USD), as well as a slight decline in stock markets and further decrease in energy prices (with WTI trading at around $68). The USD/CAD pair's gains have pushed the exchange rate back to the mid to upper 1.36 range, where the USD's recent advances have encountered resistance. Today, Canada is releasing GDP data for March and the first quarter. While growth data for March is expected to show a slowdown compared to February, overall, the first quarter has been shaping up to be relatively robust. The flash estimate for April may provide an early indication of potentially slower growth ahead. However, this does not undermine the belief that the Bank of Canada (BoC) should implement some additional precautionary tightening measures, considering persistent inflationary pressures and signs of renewed activity in the housing market. Weaker growth data could further intensify near-term pressure on the CAD.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p>The EUR has declined by slightly over 0.5% in trading, falling below 1.07 and reaching its lowest level since late March. France's May Consumer Price Index (CPI) came in lower than anticipated, and German state data indicate a below-consensus outcome for the national figure this month (expected to be +0.2% month-on-month). As a result, market expectations for European Central Bank (ECB) interest rate hikes have been slightly reduced, leading to a weaker EUR and implying limited potential for a rebound in the currency at this stage.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p>The British pound (Sterling) is experiencing a decline, similar to other European currencies, due to the overall strength of the US dollar. Survey data for May revealed a decrease in business confidence in the UK, although the Lloyds Business Barometer, which provides this information, typically does not have a significant impact on the market. The depreciation of GBP is primarily driven by the overall strength of the USD.&nbsp;</p>

<h3>USD - US Dollar</h3><p>The dollar enjoyed a rally thanks to strong JOLTS job opening data but sold off later due to comments from Federal Reserve speakers. They suggested a potential rate hike 'skip' in June but left the door open for a hike in July. This indicates a new communication tool for the Fed's tightening cycle. Today, we have ISM Manufacturing, Initial Claims, ADP employment report, and later, weekly US crude inventory data. Brent remains weak, and a large inventory build could keep it low, affecting oil-exporting currencies before the OPEC+ meeting this weekend. The greenback is expected to remain rangebound until tomorrow's NFP report.&nbsp;</p><h3>CAD - Canadian Dollar</h3><p>The Canadian dollar is extending slight gains, continuing its upward trend in calm trading conditions. Yesterday's release of Canada's GDP data indicated a strong and robust economy. The first quarter GDP surpassed expectations and exceeded the Bank of Canada's projections. Furthermore, the monthly data revealed that March's economic activity remained resilient, surpassing forecasts and showing promising signs for a smooth transition into April. These positive indicators increase the likelihood that the Bank of Canada will hike by an additional 25bp at its next meeting in June. With solid economic data and the recent narrowing of spreads between the US and Canada, look for the CAD to received a short-term boost against the greenback. Observe the&nbsp;<a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>&nbsp;trends.</p><h3>EUR - Euro</h3><p>Declines in German, French, and Spanish May inflation data have sparked speculation about a potentially weak flash CPI figure for the eurozone today. Market consensus predicts a drop in the headline inflation rate from 7.0% to 6.3% year-on-year, while the core inflation is expected to decline from 5.6% to 5.5%. If eurozone inflation falls faster than that of the US, it would surprise the market, as it had anticipated the US inflation rate to decrease more quickly due to the greater weight of assets. The recent softness in European inflation has also led to a drop in eurozone swap rates compared to those in the US, widening the two-year EUR:USD swap differential, which has negatively impacted <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a>. Unless there is a significant surprise in the eurozone CPI data, it is likely that EUR/USD will trade within a range of approximately 1.0650-1.0720 today.&nbsp;</p><h3>GBP - British Pound</h3><p>The British pound (GBP) continues to show strong performance. Although there has been a slight reduction in the aggressive tightening expectations for this year (previously estimated at 110 basis points), the adjustment has been minimal. Speculation arose regarding a speech by Catherine Mann, a Bank of England hawk, yesterday, suggesting she might push back against these tightening expectations, similar to what the BoE did last year when the market priced in a Bank Rate of 5.50%. However, in line with her tendencies, Mann cautioned that UK consumers were utilizing their excess pandemic-related savings for spending purposes, while corporates were capitalizing on improved pricing power to increase their profit margins. The market is currently pricing in approximately 100 basis points of tightening for this year.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="margin-left:0px;">Thursday saw a notable change in direction for the dollar. The news of the Federal Reserve's intention to skip a rate hike in June, along with progress on the debt ceiling deal, led to a 0.8% decline in the USD. Whether this signifies a significant reversal for the dollar depends largely on the upcoming US activity data, especially price data, which will determine if the Fed has enough leeway to assess the impact of the 500 basis points of tightening thus far before rushing into further hikes. The anticipation of additional rate hikes heavily influenced dollar pricing and bearish risk sentiment last month. The release of today's US NFP (Non-Farm Payrolls) data will play a crucial role in deciding whether the Fed will proceed with rate hikes in June. From a foreign exchange perspective, we believe that a consensus-based increase of 195,000 jobs, an unemployment rate of 3.5%, and a 0.3% monthly rise in hourly earnings would not be sufficient to alter the prevailing view that the Fed will pause in June and the dollar will continue to remain relatively weak.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="margin-left:0px;">Today, the Canadian dollar is continuing to strengthen. Over the past five sessions, the US dollar has experienced declines in four of them. If the CAD 1.3400 level is broken, it could indicate a test of the lower end of the range for this year, which is between CAD 1.3260 and CAD 1.3300. Based on the intraday momentum indicators, there is a likelihood of a rebound during early North American trading, and the initial resistance is expected around the CAD 1.3450 level. It is worth noting that in an environment where the US dollar is weak, the Canadian dollar tends to perform relatively worse in currency crosses. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="margin-left:0px;">Despite Eurozone May inflation dropping more than anticipated, the EUR/USD experienced a rally. One possible factor supporting the EUR/USD was a slightly optimistic reassessment of global growth prospects. There is a growing belief that the late-cycle inflation might not be as severe as previously thought, which could lead to central banks avoiding extensive tightening measures that could worsen recessions. In relation to the European Central Bank (ECB), the market is currently factoring in two additional 25 basis point rate hikes. The outcome of today's US data will play a significant role in determining whether the recent low of 1.0635 for EUR/USD was a significant level. If the NFP (Non-Farm Payrolls) data doesn't indicate excessive strength, there is a possibility of EUR/USD reaching the 1.0810/20 range, with an outside chance of reaching 1.0865.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The absence of significant data releases leading up to the Federal Reserve's June meeting has resulted in minimal changes in pricing. Currently, there is a 20-25% implied probability of an interest rate increase following the release of weak ISM services figures on Monday. Despite this and the overall positive conditions for stock markets, there hasn't been any substantial correction in the value of the dollar. The prevailing sentiment in the market remains pessimistic towards European currencies, while the dollar's resilience likely indicates hesitance to take on positions betting against the dollar prior to the US CPI risk event on June 13th. This event is still perceived as having the potential to influence the decision towards a rate hike on the following day. With no other significant market-moving events today, a potential rate hike by the Bank of Canada could end up providing support for the US dollar.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The Bank of Canada took a more dovish stance compared to other central banks and has maintained interest rates at the same level since January. However, persistent inflation, a very tight labor market, and a relatively positive growth outlook are making a case for a shift towards monetary tightening. The market is indicating a 45% probability of a 25 basis points rate increase happening today. Although it is a close decision, we believe it is more likely that the Bank of Canada will maintain a hawkish stance, exercising caution while evaluating the delayed effects of previous tightening measures. We still anticipate a return to 2% inflation in Canada during the early months of 2024, aided by softer commodity prices. If the Bank of Canada holds rates steady again, we expect them to convey a hawkish tone. Market expectations currently incorporate a 40 basis points tightening by the end of summer, and we believe policymakers are unlikely to push back or significantly disappoint the market's hawkish outlook given recent data. Therefore, as long as the hold decision includes indications of potential future tightening, we anticipate any negative impact on the Canadian Dollar to be short-lived, and we continue to favor the Canadian Dollar over other currencies in the current risk environment. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);"> trends.</span></p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The euro continues to suffer from a softening inflation story in the eurozone. Yesterday, April’s report on consumer expectations showed a considerable drop. While easing inflation should build a case for the doves, ECB communication has not seen drastic changes as we head into next week’s policy announcement. Yesterday, President Christine Lagarde reiterated her call for more tightening, and her hawkish tone is probably a key factor keeping markets attached to the 40-45bp pricing for the July meeting. We have other speakers to keep an eye on today. Barring major dovish remarks we feel <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> can remain anchored to 1.0700 for now.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD is slightly down in today's trading session, with limited motivation due to few new factors affecting currency movements. Major currencies are mostly gaining against the USD, while overseas stocks show limited positive gains and US equity futures have mixed performance. Major bond markets are slightly softer, but spreads for major currency pairs remain stable. The USD strengthened yesterday after the Bank of Canada surprised the markets with a rate hike, causing concerns about potential tightening by the Federal Reserve. However, pricing for the upcoming FOMC meeting indicates low confidence in a rate hike. Recent US data suggests slower economic growth, some easing in labor market tightness, wage growth, and underlying price pressures. Senior Fed policymakers increasingly indicate no rate hike this month, with a possibility of reconvening in July. These factors are likely to keep the USD defensively toned in the short term.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Following the Bank of Canada's decision to hike rates, the CAD gained strength, pushing USD/CAD towards the low 1.33 level. The tighter policy by the Bank of Canada, along with the potential for further tightening, is expected to limit losses and establish a stronger resistance level around 1.35 for <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> in the future. However, if the 1.33 support area is broken, it could lead to additional position adjustments lower in the short term. Today, we may gain further insights on the rate outlook from DG Beaudry, who is delivering the Economic Progress Report speech in Victoria.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">Revised data for the Eurozone's GDP in Q1 indicates that the economy experienced a very mild recession. The Q1 GDP declined by 0.1% quarter-on-quarter, which was the same as the growth data for Q4. The economy faced challenges due to higher energy costs. Initial estimates had suggested a slight expansion, and revised expectations had settled on stagnation rather than negative growth. The minimal impact of this technical recession on the EUR is unlikely to discourage the European Central Bank (ECB) from further raising interest rates to combat inflation. The EUR has been hovering around the 1.07 zone, but it may be shaking off the softer tone that has persisted since it peaked just below 1.11 in late April.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The British pound is experiencing a modest increase against the USD but is performing relatively weaker compared to other major currencies today. The OECD recently highlighted that the UK is expected to have one of the highest inflation rates among major economies this year, reaching 6.9%. This high inflation is driven by elevated costs of imported items, which contributes to the persistence of sticky prices. While this is not a favorable situation for the pound, it should come as no surprise that markets are still pricing in the likelihood of nearly 100 basis points of tightening by the Bank of England in the upcoming months to address the rising prices.&nbsp;</p>

<h3>USD - US Dollar</h3><p style="text-align:justify;">The US dollar is trading mixed with very limited gains and may not prevent a weak performance for the week. In May, rising US interest rates, positive economic data, and hawkish comments from the Federal Reserve influenced the USD. However, in June, there are signs of a potential reversal in USD gains. The upcoming week could further pressure the US dollar as the headline US Consumer Price Index (CPI) is expected to moderate to around 4%, possibly reaching 3% in the near future. Core prices are also expected to decrease. The Federal Reserve will need to carefully manage interest rates while keeping the option for future tightening open. Given guidance from senior members of the Federal Open Market Committee (FOMC) suggesting an unlikely rate hike this month and market expectations indicating limited chances of a hike, policymakers have no incentive to surprise investors.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD is performing moderately to start the day. Yesterday's Economic Progress Report speech by BoC DG Beaudry had little impact on the markets. The speech largely reiterated the messages from the policy statement, expressing surprise at demand resilience and concern about rising core inflation. However, Beaudry hinted at the possibility of a "new environment" with structurally higher interest rates. Despite this, the CAD has shown some improvement overnight, approaching the low 1.33 zone in anticipation of the May employment report. The report is expected to show a solid gain in Canadian jobs (consensus of 21.3k), with the unemployment rate ticking up to 5.1%. The tight labor market and wage growth incompatible with the Bank's inflation goals suggest that this week's rate hike may not be the last in the cycle. Positive data will strengthen the CAD, while significantly weaker data may slightly soften the CAD. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> is slightly down for the session, but overall, the EUR maintains a positive outlook as investors anticipate the upcoming ECB policy decision. There is a strong market expectation of a rate hike next week, and investors are heavily betting on the tightening cycle continuing until July. However, the enthusiasm for tightening bets beyond that has decreased. A 0.25% rate hike accompanied by hawkish messaging would support the EUR. The significant widening of short-term spreads between the eurozone and the US observed in May has eased and partially reversed, which will provide support for the EUR. However, further spread compression is necessary to significantly boost the EUR from its current levels.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The British pound is experiencing slight weakness in trading today, without any significant new developments such as data releases or comments from the Bank of England to influence market sentiment. Instead, it appears that the pound is consolidating its position in anticipation of a series of upcoming data releases next week, including employment figures, wage data, and economic growth statistics. These data points will provide further insights into the policy outlook beyond the Bank of England decision scheduled for June 22nd (where a 28 basis points increase is priced in). Overall, it has been a positive week for the pound, reaching a four-week high earlier today, which could attract trend chasers and momentum traders seeking opportunities for the GBP to retest the peak reached in early May.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The major currencies are seeing a decline in the value of the US dollar, reversing gains made yesterday. The decrease in the USD is driven by market positioning in anticipation of the release of US CPI data at 8:30 am ET. It is expected that inflation will show a slight decrease in headline prices in May, with a respectable 0.2% increase for the month and a 4.1% increase compared to the previous year (down from 4.9% in April). The USD is expected to decline further due to soft inflation data, as market participants carefully evaluate every piece of information that could influence the Federal Reserve's decision-making process ahead of tomorrow's announcement. Market sentiment has been leaning towards the idea of a more cautious approach from the Fed, so significant selling of the USD is unlikely to occur at this time.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The Canadian dollar (CAD) has shown a slight increase in strength against the US dollar (USD) today but remains within a familiar trading range above 1.33. There has been a modest rebound in crude oil prices following yesterday's losses, and overall commodity prices are also showing some improvement. This is partly due to expectations of increased stimulus measures in China. Global stocks are generally experiencing gains as well. The positive market sentiment suggests that the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> pair may attempt to reach the lower end of the 1.33 range this morning, provided that the US data reports align with market expectations. However, after the USD saw its first net gain in nine sessions yesterday, there may be some pressure for further consolidation in the USD/CAD pair unless there are clear indications of additional gains for the CAD in the near future.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> pair is once again approaching the 1.08 level, indicating a generally weaker US dollar. The June ZEW survey in Germany has shown a mixed sentiment among investors. The Expectations component of the survey improved to -8.5 (from -10.7), surpassing expectations of a decline to -13.5. However, the Current Situation index experienced a significant decline, dropping to -56.5 from -34.8. This decline in the index may be attributed to recent data indicating that Germany entered a mild recession at the beginning of the year.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The British pound (GBP) has regained strength, surpassing the upper 1.25 range, following the release of UK employment data that exceeded expectations. The data revealed a lower unemployment rate, job gains that were stronger than anticipated, and weekly earnings that exceeded forecasts. As a result, the June 22 Bank of England (BoE) swaps indicate an implied tightening of 31 basis points (bps), slightly higher than the 28 bps observed yesterday.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The Federal Reserve kept rates unchanged as expected, but surprised observers with a more hawkish tone. The dot plot showed a higher projected terminal rate of 5.75% and improved growth and inflation forecasts, while the unemployment outlook was revised downward. Powell emphasized that no decision had been made for July, but the upcoming FOMC meeting was considered "live." The market is puzzled by the Fed's hawkish messaging and lack of immediate action, impacting the US dollar. Although the USD index is slightly stronger, it has retreated from its high and may weaken further as market participants assess the policy outlook. The European Central Bank's rate decision today is expected to raise rates and offer somewhat hawkish guidance. US data reports include Retail Sales, Import Prices, and weekly claims, which may influence the USD if weaker than expected.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The Canadian dollar (CAD) remained relatively stable in overnight trading. Although it briefly dropped below 1.33 yesterday, it couldn't sustain the decline amid FOMC-related volatility. The CAD's recent bullish performance might be tempered by slightly wider short-term interest rate differentials between the US and Canada following the Fed's decision. However, moderate increases in commodity prices offer some positive support for the CAD. This morning, there are some domestic data releases related to Housing Starts, Manufacturing Sales, and Existing Home Sales, but they are not expected to have a significant impact on the CAD. The overall sentiment surrounding the USD and technical signals are likely to have a more substantial influence on the trading session. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The European Central Bank (ECB) is anticipated to raise its benchmark rate by 25 basis points to 3.50% and indicate the likelihood of another increase in July during today's policy decision at 8.15 ET. Recent statements from senior policymakers have emphasized the need for further progress, hinting at the necessity of one or possibly two additional hikes. Both policy hawks and President Lagarde have indicated that there is no clear indication that underlying inflation has reached its peak. By reiterating this sentiment after today's rate hike, it leaves open the possibility of rate increases extending into September.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">In calm overnight trading, the British pound (Sterling) has maintained its recent gains. With no UK data releases, the exchange rate has remained stable, hovering around the mid-1.26s, as market participants eagerly anticipate additional information. The Bank of England's 12-month inflation survey, set to be released early on Friday, could potentially influence the markets to some degree, although expectations have been declining. Nevertheless, it is unlikely to significantly alter the outlook for higher policy rates in the UK, which is a crucial factor supporting the GBP.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD is trading mixed against major currencies this week with a weak undertone. Core majors' gains have slowed, commodity FX is softer, and the JPY is down around 0.5%. The EUR didn't receive significant boost from hawkish ECB comments, indicating the stretched nature of the USD sell-off. The JPY has returned to the mid-141 zone after the BoJ's unchanged policy decision. Today's US data calendar is light, only featuring preliminary U. Michigan sentiment data. However, with the blackout period ending, we can expect comments from Fed policy makers such as Governor Waller (voter, hawk), St Louis Fed President Bullard (non-voter, hawk), and Richmond Fed President Barkin (non-voter, centrist). Chairman Powell will also address House and Senate panels next week after Monday's US Federal holiday.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">During the overnight session, the CAD has maintained a narrow range as the USD attempts to stabilize. While global stocks have seen solid gains, there has been some recent weakness in crude oil prices, creating a mixed environment for the CAD. Commodity FX, including the CAD, has generally traded slightly weaker, which could be attributed to downgrades in China's growth prospects following a series of disappointing data for May. Despite this, there is still some potential for upward movement in the CAD based on fundamental factors (with fair value currently closer to 1.31). The positive overall conditions should help limit any countertrend movements, such as a rise in the USD, at least for the time being. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">Following yesterday’s policy decision, ECB officials wasted no time in emphasizing the possibility of the ECB policy cycle extending beyond July. They anticipate a challenging discussion in July regarding whether the ECB should continue tightening until September. Echoing these views, Bundesbank President and resident ECB hawk Nagel reiterated that there is still "more ground to cover" and that the ECB may need to continue raising rates after the summer. Compared to the US, investors maintain a stronger belief in the hawkish policy direction in Europe, which should support positive sentiment towards the EUR in the near term.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Sterling was little changed overnight and continues to maintain gains made earlier this week. In May, the Bank of England's survey on consumer inflation expectations indicated continued improvement, driven by declining energy prices. Nevertheless, long-term expectations for inflation remain high, posing challenges for policymakers in their efforts to control inflationary pressures. The upcoming BoE meeting is anticipated to result in a 25-basis points hike accompanied by hawkish guidance. As a result, Sterling is expected to remain well-supported, with moderate downward movements being met with buying interest, at least in the immediate future.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">This morning, the US dollar is mixed against major currencies to start the day. Yesterday, was a consolidation of trade for the USD due to the US Juneteenth holiday, resulting in very little movement among major currencies. Today, traders may maintain a relatively cautious approach as they anticipate Chairman Powell's upcoming appearances before House and Senate panels, which should provide further insights into the US monetary policy outlook. Technical patterns suggest that the mild USD rebound observed since late last week may be losing momentum, while the overall trend of the USD index on the charts remains negative. Global stocks are adopting a defensive stance, and major bond markets are demonstrating varied performance, with US Treasuries underperforming. Soft stocks and marginally more supportive spreads may help backstop USD softness on the day.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">In quiet trading, the Canadian dollar (CAD) is performing relatively better compared to other commodity-related currencies and remains in the middle range among major currencies for the day. Stocks have seen a modest decrease during this session, while crude oil prices have shown a slight improvement. China's commercial banks have reduced their 1-year and 5-year prime lending rates by 10 basis points (bps) earlier today, following the PBoC's lead in reducing its 1-year rate. However, the anticipated larger drop in the 5-year rate has not materialized, leading to some disappointment in commodity markets regarding China's stimulus efforts. The CAD is expected to continue trading within a tight range as investors await comments from Chairman Powell and tomorrow's Canadian Retail Sales data. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The euro (EUR) is showing modestly better performance, with ECB policymakers emphasizing the debate on interest rates, which captures the attention of the markets. ECB Governor Rehn mentioned that although prices were decelerating, they were not declining at the desired pace, while core inflation was experiencing a gradual decrease. The ECB places significant emphasis on stable core prices. The market prices reflect a hawkish tone in communication, suggesting the expectation of an additional 50 basis points (bps) of interest rate hikes by autumn.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The British pound (Sterling) is displaying a moderate decline in performance during the overnight session as market participants seek to minimize their exposure in anticipation of significant event risks in the UK this week. Tomorrow, the UK will release CPI data for May, and it is expected to show a solid month-on-month increase in the headline rate of inflation, with little change expected in the core rate, which stood at 6.8% year-on-year in April. This data will set the stage for a Bank of England (BoE) interest rate hike on Thursday. The market consensus is for a 25 basis points (bps) increase, although slightly more (28bps) is already factored into market pricing.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD is experiencing an upward trend for the fourth consecutive trading session, but the progress is modest, and the overall consolidative nature of the USD's gains since Friday's low remains unchanged. Currently, the USD is stronger but slightly below yesterday's highest point. The CAD is performing relatively better, benefiting from the broader gains of the USD. The markets seem to be in a holding pattern, awaiting developments expected later in the day. Asian stocks saw a slight decline, while European stocks showed a small improvement. US futures have a slight downward trend. Major bond markets have weakened somewhat, influenced by underperforming Gilts due to disappointing inflation data. Crude oil and commodities, in general, have seen a slight decline throughout the day. The primary focus of the market today is Federal Reserve Chairman Powell's semi-annual congressional testimony before a House panel at 10ET. Considering that only a week has passed since the Federal Open Market Committee (FOMC), it is unlikely that the Fed Chair will provide significantly different information from what was heard last week. However, the market will certainly pay attention to any hints Powell drops regarding the future interest rate outlook. Chicago Fed President Goolsbee, who is known for his dovish stance, will also speak at 12.25ET. Currently, there is limited potential for further gains in the USD as investors evaluate the prospects of US rate policies.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD is holding steady around the low 1.32 range before the release of Canadian Retail Sales at 8.30ET. Market consensus predicts a 0.4% month-on-month gain in April, following a weak report in March. This forecast surpasses the 0.2% advance estimate for April, which was released alongside the March report. The summary of the Bank of Canada's discussions during their June 7th policy decision will be of interest due to the unexpected tightening measures implemented this month. The report could provide insights into policymakers' concerns regarding inflation and give an indication of potential future tightening. Positive data and a hawkish tone in the Bank's summary would boost the CAD. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The market's belief that the ECB policy will reach its peak at 4% and the resulting support for the EUR are being reinforced by hawkish comments from the ECB. For the first time since March, market projections are factoring in a terminal rate of 4% by October. ECB Governor Kazimir emphasized the importance of cooling core inflation before considering a pause in rates, highlighting policymakers' strong emphasis on persistent core inflation as a significant factor behind the recent shift towards a more hawkish approach by the ECB in recent weeks.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Once again, the UK CPI data has delivered disappointing results, surpassing expectations. In May, the headline CPI increased by 0.7% during the month (compared to an expected 0.5%), and the annual inflation rate accelerated to 8.7%. Core CPI also rose to 7.1% annually, and the 3-month annualized core rate remained above 12%, highlighting the significant surge in core prices since the beginning of the year. This data is likely to solidify a 25 basis points hike from the Bank of England (BoE) tomorrow, with markets indicating a slightly higher probability of a 50 basis points increase. Following the release of the data, the GBP experienced a decline of nearly one cent against the USD, indicating the necessity for a more aggressive level of rate support.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The US dollar is displaying weakness compared to major currencies. The USD Index is currently trading slightly below 102, marking its lowest level since mid-May and indicating a likelihood of further declines. While the USD is relatively weak against the euro, it briefly reached a seven-month high against the struggling Japanese yen. Today, there is a comprehensive set of US economic data to be released, along with speeches from Federal Reserve representatives. The weekly claims data will be closely examined, as another high reading would be difficult to dismiss as a result of isolated factors. Chairman Powell is scheduled to testify before the Senate, which is expected to be a repetition of yesterday's testimony, offering limited additional insights into the future outlook. Throughout the day, there will be speeches from Bowman (voter), Mester, and Barkin (nonvoters). Look for the dollar to remain rangebound.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Despite the subdued risk environment and a decline in crude oil prices, the Canadian dollar (CAD) is performing relatively well today. The CAD has gained momentum as market participants anticipate the possibility of the Bank of Canada (BoC) adopting a slightly tighter monetary policy in the coming weeks. According to the minutes from the BoC's June meeting, policymakers believed that inflationary pressures warranted an immediate interest rate hike. Although the deliberations summary did not provide explicit hints about the immediate policy outlook, officials acknowledged that second-quarter economic growth was surpassing expectations due to resilient consumer demand, supported by high savings and a revived housing market. The strength of the CAD seems to be justified by the consistent improvement in fair value estimates for the current spot exchange rate (currently at 1.3085). <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">In the short term, the upward movement of spot gains beyond the 1.10 level seems to be influenced by sentiment and/or momentum. There is not much fresh information this morning, except for some mildly positive French business sentiment data, to justify the strengthening of the euro (EUR). Yield spreads remain relatively stable, with a slight narrowing trend across the yield curve. However, there has been a notable presence of hawkish views within the European Central Bank (ECB) recently, indicating strong confidence in the policy outlook. This stands in contrast to the uncertainty surrounding whether the Federal Reserve can or will deliver on the interest rate hikes implied by the dot plot projections.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The rebound of the British pound (GBP) from levels below 1.27 observed yesterday appears to be driven solely by the anticipation that the Bank of England (BoE) will need to implement more substantial interest rate hikes beyond the initial 25 basis points (bps) in response to the unexpectedly high consumer price index (CPI) data. In the near term, a more aggressive policy action is expected to provide further a lift to the GBP. If the BoE indeed proceeds with a half-point rate hike, the gains of the GBP are likely to gather additional momentum. However, if the hike is limited to 25 bps, the GBP is likely to retreat to levels below 1.27 once again.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The US dollar is strengthening today and might end the week with its first gain in three weeks. The USD's rebound during the overnight session seems to have been triggered by weak European PMI data. Among major currencies, the euro (EUR) has declined by nearly 0.9% and is performing poorly, similar to the Australian dollar (AUD). The overall market conditions are supportive of the USD, as stocks are generally trading lower and bonds are finding better support. Weak signals of economic growth are negatively impacting commodities. The USD's rebound is countering the previous weakness observed due to this week's policy actions and comments from central bankers. During Fed Chairman Powell's second appearance before the Hill on Thursday, there was not much additional insight into the Fed's thinking. However, Powell seems to approach the policy outlook with caution, unlike Bowman, who plainly stated the need for more interest rate hikes in her speech yesterday. Today's soft data from Europe has slightly tempered expectations of rate hikes, but in the long run, the risks for the USD still seem to be tilted downward. This should be positive for riskier assets and negative for the USD, as investors are likely to shift their capital away from the USD and towards higher-yielding assets with greater risk in the coming months.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Yesterday, the Canadian dollar (CAD) remained fairly stable, with the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> hovering around the mid-1.31 range. However, the broader rebound of the US dollar (USD) this morning has proven to be irresistible. Given the unfavorable risk environment and weaker commodity prices, the losses in CAD seem relatively insignificant. Nonetheless, this overall backdrop indicates a somewhat weaker CAD performance today. The extent to which the spot rate can recover remains uncertain. Although the CAD is not evidently misaligned (with fair value slightly increasing to 1.3125 today), position adjustments may keep the USD relatively supported on minor downward movements, at least for the time being.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The euro (EUR) was severely impacted by Eurozone PMI data for June, which turned out to be weaker than expected. French Services data experienced a significant decline, dropping to 48 from May's 52.5, pulling down the Composite reading to 47.3 from 51.2. German Manufacturing also slumped, falling to 41 compared to the previous 43.2, causing the Composite reading to dip to 50.8 from 53.9. The preliminary Eurozone Composite reading plummeted to 50.3, indicating that economic growth is barely positive as interest rates begin to affect the economy. As a result, market expectations for the European Central Bank (ECB) have been moderated. However, policymakers are still highly likely to implement interest rate hikes, at least in July. Weaker growth is necessary to alleviate inflationary pressures at the core.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The data from the UK showed a mixed picture. The PMI numbers were slightly weaker but generally aligned with expectations. On the other hand, Retail Sales surpassed forecasts, with a monthly increase of 0.3% in headline terms and 0.1% for the core measure. As a result, the British pound (GBP) experienced a slight decline but has shown some improvement against other currencies. Market participants are still factoring in strong expectations (around 45-46 basis points) for another forceful tightening by the Bank of England (BoE) in August.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">To start the day, the USD is experiencing a decline against most major currencies, while the EUR is gaining strong support due to month-end demand and the ECB President Lagarde's hawkish comments. Currently, there is slightly more confidence in the market regarding the possibility of the ECB tightening in July (with 22 basis points priced in) compared to the Fed (18 basis points), indicating that the USD will likely struggle to improve in the near term. Stock markets are showing a mixed performance, while US futures are indicating minimal gains at the moment. The majority of major bond markets are down, and crude prices have dropped by nearly a dollar today. The upward trend in US yields that started on Monday has continued a bit further this morning. Today's US data releases include Durable Goods, housing data, Consumer Confidence, and the Richmond Fed Manufacturing Index.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD briefly hit a new high against the USD overnight but later stabilized as it awaits important data. Expected May CPI data suggests a 0.4% monthly increase and a 3.4% rise over the year. While policymakers may be somewhat pleased with the slower annual inflation rate, monthly price gains remain significant, and progress in core inflation, particularly the core median measure, has been sluggish. Although the core median measure is predicted to slightly decrease to 4.0% in May from April's 4.2%, other indicators indicate a potential rebound in core pressures. These nuances may not be immediately evident in the headline release, meaning any initial CAD depreciation due to a cooling headline figure could be short-lived and potentially reversed if elevated core measures persist. The CAD shows positive trends against other currencies, suggesting the possibility of further broad gains in the near term. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">During the central bank's policy forum, ECB President Lagarde reaffirmed a hawkish stance on interest rates, emphasizing that unless significant developments arise, the bank intends to tighten rates once again in July. She also expressed skepticism about policymakers being able to confidently declare that peak rates have been reached. This deliberate approach leaves the door open for the rate cycle to potentially extend beyond July. The ECB's clear commitment to a hawkish policy, without pausing or prolonging rate hikes, stands in contrast to the Fed's approach and is expected to bolster the EUR in the weeks ahead.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">There was positive news regarding inflation in the UK. The British Retail Consortium's price inflation gauge decreased to 8.4% year-on-year in June, marking a decline from May's record level of 9%. This significant drop in the inflation measure represents the largest monthly decrease since price growth began accelerating in 2021. Basic food price inflation also eased for the second consecutive month. Despite these developments, expectations from the Bank of England (BoE) have remained largely unchanged, and markets still anticipate approximately 44 basis points of tightening at the August meeting. As a result, the British pound is expected to find support during price declines, as the possibility of further BoE tightening remains substantial.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD is slightly higher during the session as investors prepare for central bank speakers scheduled this morning. Although the USD gains are moderate, the increase in the USD index breaks the downward trend observed since last Friday's peak. There is a possibility that month-end flows are providing a small boost to the USD. The CNY has weakened further, nearing 7.25, reaching its lowest level since November. China reported a decline of 12.6% in Industrial Profits data for May. The ECB's Sintra monetary policy forum continues today and is currently the main focus for the markets. A panel discussion involving President Lagarde, Governors Bailey and Ueda, and Chair Powell is scheduled for 9:30 ET, where their comments may provide additional insights into respective policy prospects. However, it is unlikely that this platform will present a significant departure from recent central bank communications. There may be a contrast between relatively hawkish messaging from the US and Europe. &nbsp;</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The Canadian CPI data for May showed a slight easing in line with expectations from yesterday. However, there is still some persistence in core prices, making it difficult to rule out the possibility of a subsequent interest rate hike by the Bank of Canada (BoC) in July. Although the markets were previously anticipating the overnight rate to reach 5.00% later this year, the pricing for July has decreased to 14/15bps, and expectations for a terminal rate closer to 5.25% have diminished in the past week. This has had a negative impact on the Canadian dollar (CAD) as short-term cash bond and swap spreads have widened in favor of the USD. It's worth noting that <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> is trading slightly below fair value estimates at 1.3250 this morning, the first time since February. However, the overall trend for the USD remains weak, and the potential for CAD weakness appears limited in the short term. Strong Canadian data reports scheduled later this week, including GDP and the BoC Business Outlook Survey on Friday, could still strengthen expectations for a rate hike in July.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The EUR remains strong around the mid-1.09s as investors anticipate the comments from Sintra this morning. The European Central Bank's (ECB) stance on the rate outlook is clear, and it is unlikely that today's comments will significantly change the prospects. President Lagarde has already stated this week that higher rates are likely and that there is no expectation of reaching the peak in the policy cycle in the near future. Both she and other ECB policymakers are keeping the possibility of an extended hiking cycle until September open. This stance may differ somewhat from Chairman Powell's more cautious approach to the rate outlook, indicating that there is no immediate rush to further tighten monetary policy.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">During the overnight session, the British pound (Sterling) has experienced a gradual decline, reaching the 1.27 level once again, in anticipation of comments this morning from BoE Economist Pill at 6.30ET and Governor Bailey at 9.30ET. Investors might be cautious about potential warnings in the Bank of England's (BoE) messaging regarding the economic outlook under a tighter rate policy. However, the increasing yields continue to provide support for the GBP, and the strong expectation (45bps priced in) of another significant rate hike in August is not showing signs of weakening in swaps. As a result, any dips in the GBP are likely to be met with support.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Yesterday, top central bankers issued a warning to investors, emphasizing that although policy rates have increased significantly in the past year, there is still further action required to alleviate inflationary pressures. The US dollar received a slight boost following Federal Reserve Chairman Powell's statement, in which he acknowledged the possibility of consecutive rate hikes. This statement contrasts with his recent remarks suggesting a more gradual approach to tightening. However, the insights provided by the leaders of the Federal Reserve, European Central Bank, Bank of England, and Bank of Japan yesterday did not significantly alter market expectations. Swaps pricing indicates an approximately 80% probability of a Fed rate hike in July and nearly 90% for the ECB, with a strong inclination towards further tightening by the ECB. Intraday trends today suggest that the USD's rebound is slowing down and may even reverse. US futures show positive movement, while crude oil prices are slightly weaker compared to the previous day. On the data front, we can expect the final reading of US Q1 GDP and PCE data at 8:30 AM ET, along with the weekly claims report. Additionally, Pending Home Sales data will be released at 10 AM ET.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">In a relatively calm trading session, the Canadian dollar (CAD) remains mostly unchanged. The US dollar (USD) is experiencing a mixed performance, slightly weaker throughout the day. The lack of significant movement in both stock markets and crude oil prices is not offering clear guidance, which may result in the CAD continuing to move sideways within the range of 1.32 in the mid to upper level today. Traders are keeping an eye on tomorrow's Canadian data releases, as well as the approaching long weekend. Modest gains in the USD can be attributed to slightly wider spreads. The estimated fundamental fair value for this morning stands at 1.3289 for the CAD. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">During overnight trading, the spot price of the euro (EUR) briefly fell below 1.09. However, opportunistic buyers intervened to prevent significant losses for the EUR, and the release of German regional Consumer Price Index (CPI) figures, which exceeded expectations, provided additional support and resulted in modest gains during the European trading session. All regional CPI data from Germany for June has surpassed forecasts, indicating a slight inclination towards an upside surprise in the preliminary German CPI report at 8:00 ET. If the German CPI report shows stronger numbers, it is likely that the EUR will experience further gains.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">After experiencing a decline and falling below 1.27 yesterday, the British pound (Sterling) is displaying indications of finding stability. Recent UK data revealed a decrease in consumer credit growth, but there was a slight increase in mortgage demand during May. However, existing mortgage holders chose to reduce their mortgage-related debt last month. It is noteworthy that in records dating back almost 20 years, consecutive net repayments have never been observed. At 12:30 ET, Bank of England (BoE) Monetary Policy Committee (MPC) member Tenreyro, known for her dovish stance, is scheduled to deliver a speech.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Yesterday, there was a slight increase in volatility for the USD as the focus on central banks, along with better-than-anticipated Q1 GDP revisions, pushed the USD higher. The USD has continued to gain ground this morning, causing the EUR to decrease relative to other G10 currencies. Following several remarks from central banks this week, market expectations have shifted towards the likelihood of the Fed raising rates twice more before the year ends. Although strong PCE data at 8:30 AM could boost the USD, the rebalancing of portfolios at the end of the month and quarter might lead to USD selling due to the outperformance of the US equity market. Overall, stocks are generally showing strength today, and crude oil prices are slightly higher, suggesting a favorable investment environment with a higher appetite for risk.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The Canadian dollar (CAD) remains relatively unchanged, hovering around the mid-1.32 level this morning. Unlike other major commodity-linked currencies, the CAD has not experienced a notable increase as investors anticipate the release of today's data reports. At 8:30 AM, the April GDP figures will be made available, followed by the Bank of Canada's Q2 Business Outlook survey at 10:30 AM. If the GDP report shows signs of robust growth, it should provide support for the CAD, considering the Bank's concerns about the economy operating at a relatively high level. However, the results of the Business Outlook survey will also influence policymakers' considerations. Recent reports have indicated a slowdown in growth momentum, but inflation expectations have remained remarkably resilient, indicating that the business community has little confidence in the restoration of price stability in the near future. If the Q2 survey reveals limited progress or no improvement in inflation expectations, it will further reinforce the outlook for tighter monetary policy. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">This month, Eurozone CPI data has shown a decrease to 5.5% year-on-year, down from 6.1%, which is slightly better than the consensus estimate of 5.6%. However, the data indicates a slight increase in core prices, rising to 5.4% from 5.3%. Recent statements from the European Central Bank (ECB) indicate that policymakers are particularly concerned about the potential for further increases in core prices during the summer months, as they contemplate implementing tighter monetary measures in the coming months. It is widely anticipated that there will be a 25-basis point hike in July, and market expectations suggest the likelihood of additional tightening measures by the end of the year.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The latest data on the UK's Q1 GDP confirms that there has been no change in the previous growth figures. Private consumption remained stagnant, while government expenditure was revised downward. However, there was an upward adjustment in investment, which helped offset the decline in government spending. Notably, there was a significant upward revision in Total Business Investment for the quarter, from +0.7% to +3.3%, indicating a modest positive development. In terms of housing, the Nationwide's House Price Index recorded a slightly stronger-than-anticipated 0.1% increase in June. Nevertheless, on a year-on-year basis, UK house prices experienced a notable decline of 3.5%, reaching a new low for this measure in the current cycle and marking the most substantial drop since 2009.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">This morning, the performance of the USD against major currencies is mixed compared to yesterday, when it saw slight gains following the release of the FOMC minutes from the June meeting. The impact of the minutes on the market's perception of the Fed's potential tightening in July was minimal. Prior to the release, the market had already factored in a modest tightening of about 21 basis points, and there was little change in pricing afterward. Nevertheless, given the active stance of central banks, there is a generally cautious sentiment in the markets today. Global stocks are down, and major bond markets are showing weakness. Employment figures dominate the US data reports this morning, with expectations of the ADP data indicating a gain of 225,000 private sector jobs in June (lower than the 278,000 in May), while weekly claims are predicted to increase slightly. JOLTS data will be released at 10 AM Eastern Time. Additionally, trade numbers, final S&amp;P PMI Services and Composite data, and the June ISM Services Index will be published. Positive data may boost the USD, but recent short-term trends in the USD index suggest that any gains are becoming more challenging to achieve.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">During the overnight session, the CAD experienced moderate underperformance as the USD strengthened and approached the 1.33 level. Risk appetite remains low, although crude oil prices have shown relatively strong resilience. Canada is set to release its Merchandise Trade data this morning, but the upcoming jobs data, including wages, tomorrow, will likely have a significant impact on the CAD's short-term trajectory. Considering this, market participants may refrain from making substantial moves on the CAD today, as they anticipate Friday's data reports. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">In Asian trade, the EUR initially declined to around the low 1.08 range. However, the currency has rebounded after the release of unexpected positive news: German Factory Orders experienced a significant surge of 6.4% month-on-month, surpassing the forecasted 1.0% increase. This data indicates a potential reversal of the recent weakening trend in the German manufacturing sector, which could alleviate concerns about the European Central Bank (ECB) adopting a tighter policy. On the other hand, Eurozone Retail Sales for May were somewhat underwhelming, remaining unchanged instead of experiencing the anticipated slight increase.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Ahead of the North American market opening, the British pound (Sterling) is showing strength and experiencing a significant and robust increase. This is primarily driven by higher UK interest rates. Although the UK's Construction PMI activity for June came in weaker than expected at 48.9 (down from 51.6), the BoE's Decision Maker Panel revealed inflation expectations for the next year to be at 5.7%. These expectations have remained above 5.5% since the beginning of the year. Market pricing also indicates a steady rise in expectations for the Bank of England's terminal rate, approaching 6.5% by the first quarter of next year.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Consensus estimates suggest that US Non-Farm Payrolls will experience a solid increase of 230,000 in June, contributing to a low unemployment rate of 3.6%, lower than May. Market expectations have been boosted by the strong ADP data, leading to speculation of an upside surprise in the actual data. However, it is worth noting that the "whisper" number (market-driven estimates) provided by Bloomberg surged to 275,000 after yesterday's report. This might mean that the USD's response to better-than-consensus data could be limited. Additionally, there is a possibility that the ADP data overstates the strength of the labor market compared to the official data, potentially due to seasonal effects, particularly with the surge in hospitality and services. Consequently, the USD is approaching the data cautiously. Despite gaining ground following the ADP report yesterday, the USD experienced a broad decline and closed lower for the day. Overnight, the USD's performance has maintained a defensive tone. Considering the current dynamics, there is a chance that the USD might end up lower following the release of the US jobs data, unless there is a significant deviation from expectations on the positive side.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The Canadian dollar (CAD) has maintained a weakened stance following its drop below the 1.33 level yesterday. In June, Canadian jobs data is anticipated to rebound after a weaker report in May. Analysts are expecting a gain of 20,000 jobs. While wage growth is projected to slow down to 4.6%, it is still at levels that present a significant obstacle for the Bank of Canada (BoC) to achieve its inflation target. Furthermore, the data on hours worked will provide further insight into the evolving growth trends for the second quarter, which appear to be surpassing the BoC's expectations. If the data shows strength, it should strengthen the case for another rate hike from the BoC, although it might not occur as soon as next week. This positive data would likely give a boost to the CAD. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">Yesterday, the euro (EUR) experienced a decline, falling back to the low 1.08 range, triggered by the release of US ADP data. However, there has been consistent support whenever the EUR dips, leading to a recovery back to the upper 1.08 range. Following the release of the data yesterday, there was a brief period where the 2-year spread moved unfavorably for the EUR. Nevertheless, short-term interest rate differentials have shown little change compared to the levels before the release of the ADP data. Earlier, ECB Governor Guindos mentioned that underlying price pressures remain strong, but there is some softening in core inflation. He indicated that a September rate hike is still uncertain. Furthermore, President Lagarde reiterated that the ECB recognizes the need to take action to address inflationary pressures.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The British pound (Sterling) has shown minimal movement during the session. Similar to the euro (EUR), the GBP has rebounded comfortably against the USD after a dip following the release of the ADP data. It has traded back to the mid-1.27 range. Since there are no significant data reports from the UK at the moment, the GBP's recovery is primarily supported by positioning and its short-term yield advantage over the USD.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar&nbsp;</h3><p style="text-align:justify;">Investors are adopting a cautious stance in anticipation of today's US inflation data, leading to a defensive performance of the USD against major currencies. Global stocks are showing strength, while major bond markets are strong. Commodity markets are experiencing mixed results, leaning slightly towards slight gains. The prevailing sentiment suggests that the market expects positive news from the 8.30ET release. The Consumer Price Index (CPI) is projected to demonstrate a significant decline in headline prices for June. The consensus forecast indicates a drop to 3.1%, with a modest increase of 0.3% in prices during the month. If inflation slows down, possibly reaching a two-digit handle on headline CPI in the coming months, it will reinforce market expectations that the Federal Reserve may have limited or no further adjustments to make to monetary policy after the July meeting. This sentiment would put downward pressure on the USD in general. The US dollar index is currently close to its lowest point of 2023, previously tested in January and April, at 100.82. If the index weakens below this level, it will further contribute to the already strong bearish momentum, potentially leading to a 2-3% decline in the index in the coming months.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Today's Bank of Canada policy decision is expected to lead to a 25 basis points (bps) increase in interest rates. However, there remains some uncertainty regarding whether policymakers will follow through with this decision. There is substantial evidence supporting the need for a rate hike, including persistent inflation, strong inflation expectations, a robust labor market, high wages, and a consistently strong economy. The majority of the Canadian banks, anticipate a rate hike, but the swaps market suggests only an 18 bps tightening is factored in. Currently, the market has priced in approximately 40 bps of tightening by October, so the Bank's policy outlook will heavily influence the reaction of the Canadian dollar (CAD). If the Bank adopts a dovish tone while raising rates, it could hinder the recent rebound of the CAD and potentially reverse its gains. The Bank would likely aim to avoid this scenario to continue curbing domestic prices. A more likely option is for the Bank to leave the possibility of further tightening open, if necessary. The CAD finished just below 1.3250 in Tuesday's trading session and has made additional progress overnight, testing the 1.32 level. The combination of soft US Consumer Price Index (CPI) data and a somewhat hawkish Bank of Canada rate hike could drive the spot rate towards the 1.31 handle. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The EUR remains strong, although it has retraced from its previous peak as market activity stabilizes in anticipation of the release of US inflation data. The interest rate spreads between the Eurozone and the United States have contracted in the past week, with the 2-year spread reaching –155 basis points. This narrowing has contributed to the Euro's gains. However, for the Euro to experience a significant upward movement and move higher than the 1.11 level, the interest rate spreads will need to narrow even further. The catalyst for such a development may be soft US inflation data.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The GBP is experiencing a decrease in strength compared to its highest point earlier in the trading session, as market participants adjust their positions in anticipation of upcoming data reports from the United States. The Financial Stability Report issued by the Bank of England (BoE) emphasized the significant financial burden faced by households in the ongoing fight against inflation. According to the BoE's estimates, approximately four million households will encounter a substantial rise in mortgage expenses this year, resulting in the typical borrower paying an additional GBP3000. Despite this, it is highly likely that interest rates will continue to rise in the UK as the BoE combats persistent price growth.</p>

<h3 style="margin-left:0px;">USD - US Dollar&nbsp;</h3><p style="text-align:justify;">Yesterday, the US yields and the value of the USD were negatively affected by the US CPI data, which turned out to be weaker than anticipated. Furthermore, this morning's soft PPI numbers could contribute to the challenges faced by the market as it contemplates whether the Federal Reserve's tightening measures will continue beyond the current month. If we assume that the Fed's intention to prolong the rate hikes means that there won't be another increase in September after this month's hike, then the next opportunity for a rate raise by the Fed would be on November 1st, which seems quite distant, especially considering the expectation of a cooling US economy at that time. The economic data released this week have reduced the likelihood of the Federal Reserve delivering two more rate hikes this year, and as a result, the USD is likely to be more vulnerable to negative economic data reports in the future. In today's trading session, the USD is further amplifying its losses from yesterday in a significant manner. The DXY index has declined by almost 2% this week and is currently trading below the lows observed in January and April, specifically at 100.8. Look for further USD downside in the upcoming weeks.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Yesterday, the Bank of Canada delivered the anticipated 25 basis points (bps) increase in its Overnight Rate, bringing it to 5.00%, which is the highest it has been in 22 years. The Bank's policy statement emphasized that the growth was stronger than expected and inflation remained resilient. Additionally, the statement reiterated the Bank's concern that progress towards achieving the inflation target may be slowing down. Governor Macklem stated that the Bank would tighten monetary policy further if necessary. Currently, the market is estimating a slightly higher than 50% probability of another rate hike before the end of the year. &nbsp;Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">Despite the news flow this morning not providing much support for the euro (EUR), the EUR/USD pair is swiftly advancing and has surpassed its previous cycle highs. Eurozone Industrial Production data for April showed a 0.2% increase, which was below the forecast, and a year-on-year decrease of 2.2%, which was significantly worse than expected. It is important to note that the Eurozone's industrial sector's weakness is not a recent development, and these figures are relatively outdated. The likelihood of two more rate hikes remains strong, which is expected to lead to further compression in spreads in the upcoming weeks.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Despite the absence of particularly positive domestic news, the GBP is strengthening further this morning. The UK GDP experienced a decline of -0.1% in May and remained flat in the 3-month reading, although these figures were slightly better than anticipated. The RICS House Price data indicated a significant deterioration in the housing market. Despite the negative news, the GBP continues to strengthen and maintain its weekly highs against the USD.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar&nbsp;</h3><p style="text-align:justify;">The market trend leading up to the weekend appears to be consolidation. The US dollar, which experienced significant losses of approximately 2.4% throughout the week, is showing signs of moderation today. Stocks are displaying a mixed performance with narrow fluctuations. Major bond markets are slightly weaker. This morning, there is a release of inflation-related data. It is expected that US Import Prices for June will decrease by 0.1% compared to the previous month. The preliminary July U. Michigan Sentiment data is anticipated to show a modest improvement, with a consensus of 65.5, up from 64.4 in June. The inflation expectations component of this report may attract some attention. Although the overall performance of the USD has increased today, it is on track to end the week on a weaker note. Following a period of inactive and uncertain trading within a limited range, the market may be on the verge of entering a more dynamic phase of movement. The current conditions suggest that the USD losses might extend by 2-3% or possibly even 5% over the next few months.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD has been part of the overall rally against the USD this week, although gains have been muted. Compared to other major currencies, the CAD's increase of 1.1% is the weakest and falls short of its commodity-related counterparts. It's possible that the CAD is experiencing some spill-over effects from the USD, as investors believe that both the Federal Reserve (Fed) and the Bank of Canada (BoC) will follow similar policy cycles. While this may hold true in a general sense, there are other factors that could potentially contribute to the CAD's relative strength against the USD in the coming months. If the Fed's interest rate cycle is indeed reaching its peak, which appears highly likely, it could lead to an improvement in risk assets, thereby providing some additional support for the CAD. Furthermore, a weaker USD is typically favorable for commodity prices, which should also support the CAD. Various factors already indicate that the CAD should exhibit some strength. The estimated fair value for the CAD this morning stands at approximately 1.2908. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The report on the European Central Bank's (ECB) policy decision from June 14th, which was released yesterday, reinforces the expectation of further interest rate hikes by the end of this month and again in September, particularly due to the persistent growth in core prices. The minutes also indicate that policymakers are cautious about reducing rates too rapidly. The prolonged period of higher interest rates is likely to be supportive of the EUR in the medium term.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The GBP has entered a phase of narrow consolidation, with a tight range. As there is no data being released today and market attention is shifting towards the upcoming UK Consumer Price Index (CPI) report on Wednesday, which will have an impact on expectations for the Bank of England (BoE) in August, it is probable that further consolidation will continue in the near term.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD is continuing its recovery going into the weekend. This week, the USD has gained ground against major currencies, pushing the DXY to the 101 level, with these gains being broadly spread across most major currencies. Stock markets are showing mixed to slightly stronger performance, with Asian markets being a bit weaker, but European equities and US futures exhibiting strength. US Treasuries have seen little change, while Gilts are slightly underperforming due to UK data. The USD's rebound this week offers some relief from recent losses and could be attributed to investors positioning themselves ahead of next week's FOMC decision on Wednesday and ECB announcement on Thursday. Although this week's rebound has halted the sell-off, it has not yet signaled a definitive reversal in the recent soft USD trend. Despite the recovery, many analysts still believe that the upside potential for the USD remains limited. There are no US data reports scheduled for today.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD is showing minimal movement during this session and stands out as a stronger performer compared to other major currencies. The CAD's performance seems to be closely tied to the overall trend of the USD, but currently, there is noticeable selling interest around the 1.32 level. Forecasts anticipate a 0.5% increase in Canadian Retail Sales for May, aligning with the flash estimate from the robust April report released last month. If the data confirms this positive outlook, it could provide a slight boost to the CAD in today's trading session. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> remains near yesterday's low following a marginal uptick during the subdued overnight trading. The upcoming ECB policy decision in the following week is widely anticipated to result in a 25bps hike. However, there is less certainty among market participants regarding a potential further increase in September, as reflected in swaps with only about a 50% probability of a hike. The key factor influencing the EUR's response will be the messaging regarding the interest rate outlook after the ECB's decision next week.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">This morning, Sterling received a boost from stronger-than-anticipated UK Retail Sales, which recorded a +0.7% month-on-month growth compared to the forecasted +0.2%. Additionally, data indicated that UK government finances improved, with borrowing showing a decline in May and June. However, the positive developments halted there as the government suffered losses in two out of three by-elections held yesterday. While the Bank of England's pricing for the August 3rd decision has slightly eased, markets still factor in the possibility that policymakers might implement a hike of more than 25bps, with 36bps currently priced in.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Markets are likely to remain quiet today as they await the FOMC decision tomorrow and the ECB decision on Thursday. The US dollar index has been gaining ground for six consecutive sessions and is close to recovering 50% of its losses from early July. The main driver of the US dollar's strength today is the underperformance of the EUR, which was weakened by disappointing German data and a notable increase in speculative EUR buying. This leaves the EUR vulnerable to a correction as traders adjust their positions ahead of the FOMC decision. While the rebound in the US dollar index has exceeded expectations, the overall outlook for the USD remains challenging, with most analysts predicting a weakening of the USD in the second half of the year (H2). The Federal Reserve is expected to raise interest rates tomorrow, which is likely to be the final move in the current cycle. Policymakers may leave the possibility of further tightening in the future, but historically, markets tend to focus on the peak of the rate cycle, and the USD has typically weakened after reaching its highest rates. This morning's data in the US includes reports on housing and consumer confidence, as well as the Richmond Fed Manufacturing Index.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">On Monday, the CAD experienced a slight upward movement in an overall quiet trading session. However, today, it has retraced some of those gains (less than 0.1% so far) after testing the mid-1.31 area again during the overnight session. The CAD is currently trading just below its estimated fair value, which is slightly below 1.30. The CAD is receiving significant support from stronger commodity prices, particularly with notable gains in crude oil and wheat prices over the past few sessions. This positive sentiment is fueled by a generally optimistic risk appetite in the markets, as investors anticipate a slowdown in central bank interest rate hikes. This positive outlook for central bank policies should provide some support for the CAD, or at the very least, help mitigate any potential losses for the currency, even if the market's attention is focused on other matters at the moment. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">Germany's Ifo Business Confidence reading for this month declined more than anticipated, coming in at 87.3 (compared to a forecast of 88) after a revised figure of 88.6 in June. The data revealed that the majority of sectors in the economy are facing challenges due to worsening conditions, indicating that the economy is struggling to recover from the early-year slump. Weak demand from China and increasing interest rates are among the factors contributing to these difficulties. The soft economic data put downward pressure on the EUR. However, despite these concerns, the market's swaps still indicate a 25bps ECB interest rate hike expected for this week, with a fairly strong level of confidence (roughly 80% probability) in the possibility of another rate hike before the end of the year.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The GBP received a slight boost from survey data that turned out to be firmer than anticipated, although it still indicates softness. This contributed to the currency's ongoing recovery from yesterday's test around the 1.28 level. The CBI's Manufacturing Orders survey for July showed improvement, with the index rising to -9, up from -18 in June. Export orders also showed signs of improvement, along with increased activity and optimistic expectations, indicating a potential rebound in industrial activity.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The FOMC decision met expectations with a 1/4-point rate hike, and Chairman Powell stressed data dependency for future moves. Market pricing indicates a low probability (20%) of a rate hike at the next meeting, and less than 50% likelihood of a move before year-end, slightly lower than before. Markets lean towards the belief that the Fed might be done with tightening. Attention now turns to the ECB's policy decision, and the US releases Q2 GDP data this morning. The US economy has been holding up well, with consensus estimates of 1.8% growth (down from 2.0% in Q1) and a drop in the core PCE deflator to 4.0% (from 4.9% in Q1). This "goldilocks" scenario poses some risk for the USD. Yesterday, the USD closed defensively and remains weaker this morning against major currencies. The expectation of the Fed rate cycle peak is contributing to this weakness, with markets anticipating further USD depreciation.&nbsp;</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD has gained slightly against a weaker USD, but its performance is relatively modest compared to other currencies in this session. It tends to lag when the USD is weak and outperforms when the USD strengthens, making it one of the weakest major currencies since the end of June (the DXY declined by a little over 2%). The CAD faces some yield-related pressure due to differences in monetary policy between the Fed and BoC. However, it receives support from a softer USD, increased risk appetite, and somewhat higher commodity prices. The spot rate is currently well below its estimated fair value (1.2967). Nonetheless, there's an expectation that the CAD will likely make progress towards at least reaching the 1.30 mark in the near future. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">With a 25bps hike from the ECB already fully priced in, the FX market's reaction will now depend on the communication around the policy outlook. Lagarde might moderate the "more ground to cover" messaging as the rate cycle approaches its likely peak. However, there is a possibility that the door for a little more tightening after the summer will be left open due to persistent core price trends. Market expectations indicate slightly slower rate cuts in Europe compared to the US in the coming quarters, providing some protection to the EUR from negative rate spreads. Currently, the EUR is showing strong demand ahead of the ECB decision, but this can be attributed more to the broader selling of the USD rather than a particularly positive sentiment towards the EUR. Among generally stronger G10 FX currencies, the EUR's performance is considered middling. Despite this, solid gains this week suggest that more strength is anticipated in the future.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The GBP has strengthened slightly, but with a gain of just under 0.5% for the day, it is not particularly noteworthy considering the overall strength of major currencies. There are limited developments in the UK currently. The CBI's retail sales survey indicated a significant decline in activity this month, continuing the recent trend of softness in the series. This data had a slightly negative effect on the GBP earlier, although the spot rate was already pulling back from its highest levels of the day. Notably, the strength of sterling is largely supported by generally high UK interest rates and positive yield spreads compared to US Treasuries.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The trade-weighted DXY dollar has edged higher due to a combination of robust US activity data and euro weakness following the recent ECB meeting. Federal Reserve Chairman Powell emphasized the significance of upcoming data releases before the September FOMC meeting, which includes two CPI prints, two jobs reports, and the Employment Cost Index (ECI). Today, the second-quarter ECI figure is expected to be around 1.1%, a decrease from the previous quarter's 1.2% and a peak of 1.4% recorded in the first quarter of 2022. The prevailing risks indicate a potential reading below the consensus estimate, possibly at 1.0%, given softer average hourly earnings and survey evidence, such as the Fed's Beige Book and the NFIB data, suggesting an improving balance in the US labor market. Should the ECI number turn out to be weaker than expected, it could erase the currently priced 8bp for the US tightening cycle this year and may lead to a 0.5-1.0% depreciation in the dollar. &nbsp;</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD remains stable in today's trading session, with the USD's progress stalling once again around the mid-1.32 range. However, soft risk appetite and weaker commodity prices pose challenges for the CAD in the short term. Despite this, the USD's recent highs within the mentioned range persist. At 8.30 ET, Canada is set to release industry-level GDP data for May. Analysts expect to see a 0.3% growth for the month, following a flat reading in April. The consensus estimate falls slightly below the preliminary data of 0.4% that was released along with the April report. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);"> trends.</span></p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The euro (EUR) experienced further losses during overnight trading before stabilizing and rebounding from the mid-1.09 range, as these losses created an opportunity for bullish investors to re-enter the market. ECB Governor Villeroy expressed the central bank's growing confidence in the disinflation trajectory and reiterated that future interest rate decisions would be data-driven, echoing President Lagarde's remarks from the previous day. Consequently, expectations for a September interest rate hike have diminished, with the likelihood of another 25bps increase now estimated at around 30%. At 8.00 ET, Germany will release its June Consumer Price Index (CPI) data. Earlier regional CPI data supported the view of a modest slowdown in inflation, with the consensus projecting a 6.2% year-on-year increase, down from 6.4% in May. Additionally, France's Q2 GDP outperformed expectations, showing a growth of 0.5% quarter-on-quarter compared to the anticipated 0.1%.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Among the major currencies, the British pound (GBP) is exhibiting a moderate outperformance during the current trading session. Notable domestic developments are absent at the moment. However, bargain hunters seem to be stepping in to support the GBP during its declines. The positive yield spreads in comparison to the USD continue to bolster the sentiment towards the GBP.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Weaker performance of equity markets is causing a general sense of risk aversion in the FX markets, but there hasn't been any notable flight to quality in bonds. The sentiment is being affected by softer-than-expected Chinese economic data. Specifically, the Caixin Manufacturing PMI for July fell to 49.2, well below expectations and marking the lowest reading since the beginning of the year. The USD had previously experienced a boost following last week's rise around the ECB policy decision on Thursday, paving the way for further strengthening, with many investors seeing a stronger USD as the most likely direction at the moment. However, there's still a belief that the USD may face losses in the longer term after short-term gains. Nonetheless, there is clear and significant momentum building behind the USD rebound. Today, there are manufacturing PMI data being released for the US (final numbers), Canada, and Mexico. Additionally, the US will also be publishing ISM manufacturing data at 10ET, while Mexico will release remittances data for June at 11ET.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Yesterday, the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> pair once again tested the short-term support level around the mid-1.31 area. However, the lower boundary of the trading range held strong, acting as a platform for the USD to recover and move towards the upper end of the range today. Recent data on positioning and sentiment indicate that market participants are currently mostly uncertain about the outlook for the CAD. In the past, speculative, hedge fund, and institutional accounts were unanimously and aggressively bearish on the CAD earlier in the year, but they were forced to close their bearish positions as the CAD rebounded during the middle of the year. Currently, there is a considerable amount of money on the sidelines, waiting to see if the CAD shows a clear directional intention before joining the market. If there is a clear and decisive break through the mid-1.32s level, it increases the likelihood of a potential move towards the 1.33 handle, but it might be the upper limit of what can be expected at this moment. The fair value for the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> pair is estimated to be at 1.3012 as of this morning.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The final Eurozone Manufacturing PMI data for July remained unchanged at a modest 42.7, indicating sluggish growth in the sector. Despite this, Eurozone unemployment remained steady at 6.4% in June, following a downward revision from the previous month's 6.5%. Notably, unemployment is currently at an all-time low. The tight labor market situation poses the risk of maintaining elevated wage growth, and it will require ECB policymakers to remain vigilant for the foreseeable future. Even though the recent decision by the ECB may have raised the threshold for further tightening, it is still premature to give the green light on rate hikes.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The Bank of England's decision on Thursday is widely anticipated to lead to a tightening of at least 25 basis points. However, the latest data from the UK shows further signs of slowing shop price inflation, as evidenced by the BRC Shop Price Index, which decelerated to 7.6% year-on-year in July. Additionally, the final July Manufacturing PMI data also displayed weakness. These factors may sway the risks against a more aggressive policy move. To maintain a strong stance, the British pound will likely require a "hawkish tightening" approach, which could potentially allow it to make another attempt at reaching the 1.30 zone. It's worth noting that UK yields are currently trading at a premium to US bond yields across the yield curve, offering crucial support for the GBP.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Following the recent news of Fitch downgrading the US sovereign credit rating from AAA to AA+, markets remain cautious about risk. This downgrade comes after S&amp;P Global's debt rating cut in 2011, leaving only Moody's as the major rating agency still giving the US a top credit rating. Fitch justified its decision by pointing to tax cuts, spending initiatives, and various economic shocks that have contributed to increased deficits. US officials disagreed with the decision, citing the country's strong economic growth and its ability to manage its debt. However, Fitch also highlighted a "steady deterioration" in governance standards related to fiscal and debt matters over the past two decades, with "repeated" debt limit stand-offs and last-minute deals eroding confidence in fiscal management. The impact of this downgrade on Treasurys and the USD has been limited, but the stock market has reacted negatively, prompting investors to sell. The DXY initially dropped after the news but has since regained some ground. However, it might encounter resistance around the 102.50 area as investors assess the implications of the downgrade. Data shows that the US combined deficit (fiscal and current account) is widening, reaching 10.2% of GDP, the widest level since 2012 (excluding the COVID period). These developments could contribute to structural challenges for the USD in the medium to long term and may raise concerns among investors about "de-dollarization" trends, as central bank reserve managers reduce their exposure to the USD. Currently, there is limited significant data being released. The only notable upcoming report for North America is the US ADP jobs report, with a consensus forecast of a 190k increase in jobs. Last month's ADP data indicated a substantial 497k rise in private sector hiring, which was not reflected in the overall slowing trend of the NFP (Non-Farm Payrolls) data.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD has weakened today, primarily due to external factors and a general decline in risk appetite. Despite the recent increase in crude oil prices to $80/barrel, the CAD hasn't received significant support from this development. Moreover, the relatively smaller difference in yields between the US and Canada has not been given much attention. As a result, the CAD remains undervalued when compared to our fundamental equilibrium estimate of 1.3036. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">After the Fitch announcement, the EUR briefly surged above 1.10 in late trade yesterday but has since retraced to the upper 1.09s amid uneventful trading. The current market positioning and uncertainty regarding the ECB policy outlook imply that the EUR might maintain a weaker stance in the short term. However, as the EUR dips to the low/mid 1.09 area, bargain hunters could potentially renew their interest and support the currency.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Following its late gains on Tuesday, the GBP is currently experiencing a slight decline, with progress stalling around the 1.28 level, mirroring the overall USD movement after the Fitch decision. Investors' attention is now turning towards Thursday's BoE decision. There is uncertainty in the markets regarding whether the BoE will implement a 25 or 50 basis points hike tomorrow. Despite this uncertainty, the GBP is expected to receive support on any downward movements.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD remains strong after its gains yesterday. US Treasuries are facing pressure following the Fitch news, and the US Treasury refunding announcement, which indicated a significant increase in supply over the upcoming year. This surge in supply was not surprising to the Treasury market. The weakness in Treasurys is impacting global yields and putting pressure on stocks. The USD gains yesterday were a result of safe-haven trades and position adjustments following Fitch's US sovereign credit rating cut. While the downgrade news doesn't immediately negatively impact the USD, it doesn't provide a positive outlook either and may contribute to longer-term challenges for the USD. Today, there is a comprehensive set of data releases from the US. Weekly claims and Q2 Unit Labour Costs are scheduled for 8.30ET, with the latter expected to show a marked deceleration, which could temporarily alleviate the upward pressure on US rates. Final Services and Composite PMIs will be released at 9.45ET, while Factory Orders and ISM Services data are due at 10ET. Richmond Fed President Barkin will also be speaking on the economic outlook at 8.30ET.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The USD is showing overall strength, and US bond yields are on the rise, while equities are weak, creating a challenging situation for the CAD. This morning, the CAD is experiencing additional pressure, trading in the upper 1.33s. Crude prices have stabilized after a decline yesterday, but this offers little solace to the CAD, which remains susceptible to external factors. The fair value estimate has increased recently, indicating less support for the CAD. However, despite this, CAD losses still surpass the modeled equilibrium estimate of 1.3128. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);"> trends.</span></p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> is showing some weakness but managing to hold around yesterday's session low. The final German Services and Composite PMI data for July were slightly adjusted upward compared to the preliminary figures. However, this wasn't enough to prevent a modest downgrade in the overall Eurozone data. The Services index was revised down by 0.2 to 50.9, and the Composite reading was adjusted 0.3 lower to 48.6 compared to the initial report. ECB Governor Panetta made comments indicating that underlying inflation was slowing down, and there were increasing downside risks to the economy. He also mentioned that core inflation was likely to remain relatively stable throughout the summer. Policymakers are set to make decisions on interest rates in September.</p><h3 style="margin-left:0px;">GBP - British Pound&nbsp;</h3><p style="text-align:justify;">Before the Bank of England's policy decision at 7.00ET, GBP experienced a decline, following the overall trend in G10 FX during the overnight session. The UK's final Services PMI for July remained unchanged at 51.5 from the preliminary reading, while the Composite reading was revised slightly higher to 50.8. Swaps pricing indicates a slight decrease, now factoring in 30bps of tightening from the Bank of England today. If the Bank implements only a 25bps hike, it could be seen as somewhat disappointing, and to prevent further losses in GBP, guidance indicating the necessity for further rate increases will likely be required, specifically in the low 1.26s range.&nbsp;</p>

<h3>USD - US Dollar</h3><p>The US dollar is mixed to slightly stronger as markets are starting to stabilize following earlier week's volatility. European stocks are trading higher, and there has been a modest rise in Asian stocks, while US equity futures are positive. US 10-year yields remain close to the recent high at 4.20%, with intraday trends largely following other major bond markets. Commodities, such as crude oil and iron ore, are showing a mix of slight firmness. The July US Non-Farm Payrolls (NFP) data is expected to indicate a 200,000 increase, slightly lower than the previous month's 209,000 and below the three-month moving average. There is a "whisper" number among market participants suggesting an anticipated gain of 221,000. Wage growth is projected to slow down, which is something policymakers are likely to observe closely. Although the USD has performed well throughout the week, its gains appear to be moderating and could possibly reverse based on chart analysis. A lower close today would have a negative technical impact on the Dollar Index (DXY) and may indicate the emergence of some corrective pressure.</p><h3>CAD - Canadian Dollar</h3><p>The CAD is showing very little movement today, holding near its session and weekly high. It is expected that Canadian employment will increase by 25,000 jobs in July, following the strong rise of 59,900 jobs in June. Hourly wages are forecasted to experience a slight increase of 4.1%, compared to the 3.9% seen in June. As it's a long weekend in Canada, domestic business activity might slow down quickly after the morning's data releases. Despite this, stable risk appetite and a rebound in crude oil prices suggest that the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>'s upper 1.33s range should remain relatively strong. If the data surprises positively, the still undervalued CAD might find some support, at least to some extent.</p><h3>EUR - Euro</h3><p>During the overnight period, EUR/USD remained within a narrow range and is commencing the day with little change against the USD. In a surprising development, German Factory Orders experienced a substantial 7.0% increase in June, but this data had no significant impact on the EUR. The rise partly counters an unusually sharp decline in orders witnessed in March. However, when observing the 3-month over 3-month trend, it reveals that orders are only up by 0.2%, which may be a more accurate representation of the relatively weak state of the industrial sector.</p><h3>GBP - British Pound</h3><p>The GBP is consolidating the gains realized from the lower 1.26 zone observed yesterday, subsequent to the Bank of England (BoE) raising the benchmark interest rate by 25 basis points. The BoE's announcement indicated that further rate increases might be necessary, and it made it clear that the policy would likely remain elevated for a considerable period to tackle inflation. This stance aligns with the overall sentiment in the market. There is no market expectation of rate cuts in the UK over the next 12 months. In contrast, some minor easing is anticipated for the European Central Bank (ECB) during the same period, and the US swaps curve indicates around a 50-basis-point decrease in rates. While the UK/US spreads have narrowed since early July, they still favor the GBP, which should provide support for the currency.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The FX market remains influenced by a cautious attitude towards risk. The Asian market sentiment and commodity prices were negatively affected by reports of weakened Chinese trade data. This negativity was compounded by yesterday’s downgrade of credit ratings for US regional banks by Moody's. Notably, Chinese exports saw a significant year-on-year decline of 14.5% in July, with imports also falling by 12.4%, surpassing expectations. This has led to a 0.5% decrease in US equity futures. Conversely, there has been a strong rally in bond markets, resulting in a decline of 9-10 basis points in US Treasury yields and 11-13 basis points in European bonds. The US dollar has experienced a widespread increase in value, partially reversing the losses incurred after the release of the less impressive US jobs data on Friday. However, potential gains in the US index might encounter resistance around the upper 102 range, assuming that the overall risk environment doesn't worsen significantly. Economic data scheduled for today includes US and Canada trade data, along with the US Wholesale Inventories report. Furthermore, a USD42 billion auction of 3-year notes by the Treasury is also taking place today, marking the first bond auction subsequent to the Fitch credit downgrade.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Lackluster enthusiasm for risk and declining commodity prices continue to exert downward pressure on the Canadian dollar (CAD). Despite a relatively calm trading session yesterday’s holiday, the lack of substantial CAD support is evident in today's trading behavior. The weakening of the CAD seems to surpass what can be entirely attributed to the underlying economic fundamentals. Various models indicate that the fair value should be notably lower than the current exchange rate (slightly below 1.31 this morning). However, a substantial improvement in the overall market sentiment will be necessary to foster a positive shift for the CAD at this juncture. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The unexpected imposition of a windfall tax by the Italian government on bank earnings generated from elevated interest rates has taken the market by surprise. This has contributed to an overarching atmosphere of prudence prevailing in the markets today. Interestingly, the EUR stands out as one of the more resilient currencies during this trading session, experiencing a 0.3% decline against the generally robust USD. The USD's strength is clearly stemming from the broader decline in market sentiment. If the Italian government's move negatively influences local banks and consequently impacts the enthusiasm of US investors, who have shown a substantial interest in European stocks as of late, there is a possibility of longer-term adverse effects on the EUR.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The British pound is down 0.5% against the US dollar, primarily as a response to external events. Noteworthy UK data releases are absent for the day. An advisory from BoE economist Pill suggests that UK food prices might not fully recede from their notably elevated levels. The depreciation of the pound can be attributed to both general strength in the US dollar and a slight reduction in yield spreads favoring the pound against the USD on the current day.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The markets are experiencing a calmer tone this morning, leading to a general decline in the value of the USD. News yesterday revealed that the Italian government's decision to limit the windfall tax on local banks has caused a strong recovery in European stock markets. Bond performance has slightly improved, and energy prices are holding steady following a rebound in crude oil from its earlier intraday low. The USD is predominantly trading lower compared to other major currencies. The upward trend of the USD observed in July seems to have halted; with the Federal Reserve adopting a more neutral stance and reaching the peak of its policy adjustments, it will become increasingly challenging for the USD to manage gains in the short term. Tomorrow's release of US CPI data might still surprise the markets with a slight uptick in price growth, but relying solely on this factor might not propel the USD significantly higher. Potential gains in the Dollar Index (DXY) are likely to be constrained within the mid to upper 102 range. On a different note, yesterday's robust 3-year treasury auction was mainly fueled by strong interest from foreign purchasers. These results paint a positive picture for today's 10-year auction ($38 billion) and indicate that overseas investors are not overly concerned about the recent US sovereign credit downgrade issued by Fitch last week.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The CAD hasn't moved much despite the improved risk environment, as it remained within a narrow and steady range against the USD during overnight trading. The <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>'s upward movement reached its highest point just slightly below 1.35 yesterday. The CAD's performance was assisted by the recovery in crude oil prices and stocks rebounding from their lows. Corporate sellers have not yet capitalized on the USD's rise to its highest levels since early June.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The announcement made by the Italian government yesterday evening, indicating that the windfall tax imposed on Italian banks will have a cap (set at 0.1% of risk-weighted assets), implies that the potential costs might be notably lower than initially anticipated. The EUR has gradually increased its value from the lower range around 1.09, a level it had touched early yesterday. The area around 1.09 has served as a stable support for the EUR in the past week. If the EUR manages to surpass 1.10 and move higher, it would contribute to a positive and short-term upward momentum.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The GBP is exhibiting a somewhat weaker performance this morning, but the factors behind the decline are not fully evident (as there were no data releases from the UK). Sterling still appears to be relatively undervalued in a broader context, and the possibility of a prolonged cycle of tightening in BoE policy is still a significant market concern. Overall, the British pound is likely to maintain strong and well supported on dips.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Markets are displaying a cautious stance following China's release of loan data that fell below expectations, with new loans hitting their lowest point since 2009. This underscores worries about global economic growth. The Chinese Yuan (CNY) has also lost value, reaching its lowest value in a month. Global stocks are in decline, and bond markets are showing vulnerability. The US Dollar (USD) remains relatively strong due to subdued risk sentiment, with the dollar index facing resistance in the mid to upper 102 range. This resistance follows a notable recovery from the lows experienced around the time of the US Consumer Price Index (CPI) report. The recently released US CPI figures aligned largely with predictions, and further positive developments on the inflation are anticipated in the upcoming US Producer Price Index (PPI) data. Overall, the softer pricing data suggests that the already low possibility of a Federal Reserve rate hike in September has diminished even more.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The CAD has shown little movement overnight and weak risk-appetite maintains a bias towards further potential declines against the USD in the short term. Crude oil prices are also lower, adding to the CAD’s current negative sentiment. The current exchange rate remains notably divergent from its estimated fair value (1.3156 today), and there's limited motivation for investors to drive the CAD's value upwards while the prevailing risk landscape continues to be demanding. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> pair has maintained a narrow range below 1.10 amid calm trading conditions. This comes after the Euro (EUR) experienced advances into the mid-1.10s yesterday, which were subsequently halted and reversed following the release of the US Consumer Price Index (CPI) report. While the EUR holds a positive outlook for the extended term, recent data on positioning and sentiment underscores that the long EUR position is already somewhat overcrowded. This saturation might be limiting the EUR's potential to progress without more compelling motivations.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The GBP experienced an upward surge following the unveiling of robust UK economic activity data. The GDP figures for June showed a 0.5% increase for the month, surpassing the anticipated 0.2% rise. Additionally, the second-quarter GDP demonstrated a 0.2% quarter-on-quarter growth, exceeding predictions of stagnation. Various sectors of the economy, including manufacturing, construction, and business investment, exhibited significantly stronger growth than anticipated during this timeframe. The data's impact slightly contributed to the prevailing projections of a potential interest rate hike by the Bank of England (BoE) in September.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">There are numerous dynamic elements at play in the markets today, and unfortunately, none of them will add to a positive trend. The USD is commencing the trading session in a defensive position. Unexpectedly, China has reduced its Medium-Term Lending Facility rate by 15 basis points, marking the second cut since June. The CNY has fallen below its late June low, reaching its lowest point since November. In an effort to bolster the RUB, Russia has raised its key rate by 350 basis points, albeit briefly. The unexpected move by China has rattled risk assets, intensifying investor concerns about China's growth prospects. The global stock market is showing weakness, commodities are generally experiencing declines, and major bond markets have shown a decrease in strength. Surprisingly, the USD hasn't gained much strength from the prevailing risk-off sentiment this morning, potentially indicating that investors believe they are adequately exposed to the USD at the moment. A slew of data is expected from the US today, including Retail Sales (projected to increase by 0.4%), Import Prices, the August Empire Manufacturing survey, Business Inventories, the NAHB Housing Market Index, and later in the day, TIC flow data. Minneapolis Fed President Kashkari, known for his hawkish stance on the FOMC, is scheduled to speak at 11 AM ET.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The CAD experienced a slight decrease during the early hours today, aligning with other major commodity-based currencies a direct result of weaker stock markets and declining commodity prices. The CAD's performance is significantly influenced by external factors, making it susceptible to various flows and technical influences before today's data release. Canada is set to unveil its Manufacturing Sales for June and Consumer Price Index (CPI) for July at 8:30 AM ET. The CPI is anticipated to exhibit a 0.3% increase for the month, which would push the year-over-year rate back up to 3.0%, rebounding from June's 2.8%. There is an expectation of modest improvement in the core CPI figures. The Bank of Canada (BoC) has cautioned that inflation could remain around the 3% mark in the short term, as the straightforward progress in containing prices has been mostly achieved. If prices continue to remain elevated, this might offer some support to the CAD, especially if the data impacts the limited (20%) likelihood of a September BoC rate hike. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> stabilized above 1.09 overnight and got a small lift from Germany's August ZEW survey, which revealed improved investor expectations this month (-12.3, up from -14.7 in July). Despite low market expectations, ECB rate hike probabilities strengthened, lifting Eurozone bond yields. Core 10-year yields rose by 9-10bps, and US Treasury yields increased by 4bps during the session, narrowing yield differentials in favor of the EUR.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The European fixed income market was affected by UK wage data. Weekly Earnings surged 8.2% in June (3M/Y basis), surpassing expectations and rising a full point above the revised May data. Excluding bonuses, the data also outperformed forecasts, reaching a record 7.8%. This has led to BoE's September rate hike expectations rising from under 25bps to over 30bps, offering support to the GBP.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD is displaying a slight decline in trading performance today, following a streak of four consecutive days of gains that brought the DXY index to test its 200-day moving average. This benchmark has held steady for the past three days, and if today's session ends with a lower value, it would present a more evidently negative outlook. However, the strong US Retail Sales data from yesterday further contribute to the indications that the US economy is maintaining a satisfactory pace of growth. According to the Atlanta Fed’s Q3 GDPNow index, it appears that growth is on track to surpass 5% for the current quarter. While it is still quite early to make concrete predictions, the consensus estimate suggests growth of around 0.7% for Q3. Nevertheless, the ongoing robust growth in the US is somewhat overshadowed by persistent inflation pressures in Europe, which were once again evident today. This situation implies a leaning toward the possibility of interest rates remaining elevated in the US, while heading even higher in Europe over the next few months. Forecasts point to a broader weakening of the US dollar throughout the second half of the year, as the US policy cycle reaches its peak and markets start anticipating the commencement of rate reductions. Notable US data releases scheduled for today include July Starts/Permits at 8:30 AM ET, Industrial Production at 9:15 AM ET, and the July FOMC Minutes at 2:00 PM ET. During the latter release, there might be indications of differing perspectives on the direction of rate policy emerging.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">Canadian short-term interest rates saw a slight uptick with inflation data surpassing expectations. This caused the gap in interest rates between the US and Canada to narrow, providing the CAD with a partial counterbalance to the negative effects arising from weaker stock performance observed yesterday. Although there was only a marginal adjustment in the Bank of Canada's BoC outlook for the upcoming policy decision in September, the market's outlook for rate hikes shifted to imply 7 basis points (bps) of tightening, up from around 5bps prior to the release of the data. The inflation figures indicated a strengthening in core price growth and a sustained broad increase in prices. These trends could raise concerns for policymakers, as they await signs that the forceful policy tightening measures implemented thus far are influencing price patterns. Despite these developments, the CAD continues to struggle in its efforts to gain strength. It has exhibited minimal changes in value during the trading session, particularly in relation to a generally weaker USD. As for today’s data releases, projections suggest that July's Housing Starts will likely decrease to a rate of 244,000 from June's 281,400. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">In the second quarter, the Eurozone’s GDP experienced an initial increase of 0.3%, and there was a more robust than predicted 0.5% month-on-month growth in Industrial Production for June. However, the fundamental trends within the industrial sector continue to exhibit a lackluster performance, and the decelerating growth in China is expected to adversely affect the outlook for exports. Despite the encouraging domestic data, the yield spreads between the Eurozone and the United States have slightly widened by 2 to 3 basis points during the session, exerting a mild downward pressure on the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=EUR&amp;from=USD">EUR</a>.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The GBP stands out as a leading performer this morning, propelled by the unveiling of consumer price index (CPI) figures that exceeded earlier predictions. In July, there was a monthly drop of 0.4% in headline prices, juxtaposed with a yearly surge of 6.8%. Meanwhile, core inflation maintained its stability at 6.9% throughout the year in July. The combination of decelerating inflation progress and robust wage growth is renewing anticipations that the Bank of England (BoE) might find it necessary to continue raising interest rates beyond the previously projected September timeframe. December swaps are indicating an expected total increase of 65 basis points in tightening measures going forward.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD is trading mixed against major currencies, yet the index gained traction due to weak European markets after lackluster PMI data. While stocks rose, weak European growth signals led to lower crude oil prices, further strengthening the USD rally, pushing the DXY near 104. However, limits might curb the dollar's rebound, especially with the upcoming Jackson Hole event. Some US economic data, including PMIs and New Home Sales, was released today. Recent DXY gains are mainly due to favorable spreads versus other currencies. The index, trading near its projected value based on 2-year spreads, could be fairly priced, and narrowing spreads might hinder USD advancement.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The CAD is currently experiencing a sense of decline, as several factors appear to be working against its favor. Despite a positive performance in global stocks for the day and a relatively stable short-term spread, the CAD's sentiment has been dampened by recent trends of decreasing crude oil prices over the past few sessions. This has contributed to the USD maintaining better support and the currency's actual value being separated from estimated fair values (1.3274 as of this morning). This morning, Canadian Retail Sales data will be released, and it is anticipated to show no significant change for the month. Should the data turn out weak, it could further contribute to the prevailing negative sentiment surrounding the CAD. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">Initial PMI data from the Eurozone indicated subdued, although slightly improved, manufacturing trends in Germany and France compared to forecasts. However, both nations experienced significantly weaker-than-anticipated services activity this month, resulting in a decline of the Eurozone services index to 48.3. This stands in contrast to the expected 50.5 and the 50.9 recorded in July. The composite index, which takes both sectors into account, decreased from 48.6 to 47. This underwhelming data suggests that sluggish growth patterns continue. As a response to this data, September ECB swaps eased by approximately 5 basis points, signifying that less than 10 basis points of tightening are now factored in. The data has led to increased uncertainty about the possibility of further tightening measures.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The GBP has experienced a decline of over one cent from its levels prior to the PMI data release. Disappointing UK data also showcased a significant decrease in services, dropping to 48.7 in August compared to July's 51.5. The initial composite index for this month fell to 47.9, down from the previous 50.8. Although expectations for Bank of England (BoE) policy have weakened, markets are still anticipating a 50 basis-point tightening in the upcoming months, peaking at 5.75%. There is currently more than 25 basis points priced in for September's decision. Sterling might discover support in the low 1.26 range.</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD is stabilizing following a drop from the highs against other major currencies yesterday. There isn't much significant news today, and the USD's rise might be due to the market's hesitance to make big moves ahead of Powell's remarks at Jackson Hole tomorrow. Global stocks are showing a positive trend, and bond changes are minimal; however, Treasuries are lagging. Crude oil prices are seeing a minor boost, while iron ore prices have declined. The data from yesterday indicated a downward revision of US NFP growth in the past year, but the decrease in job numbers (306k) wasn't as significant as predicted. St. Louis Fed President Bullard implied that due to robust US growth, the anticipated rate hike in September might materialize, and even hinted at the possibility of a rate as high as 6%. Currently, the market expectations don't surpass 5.50%, far from the 6% mark. This sets the stage for what the USD expects from Powell's statements tomorrow. Those bullish on the USD will be keen to hear that the FOMC meeting in September is still in play, and that interest rates might stay high for a longer duration. Without a decisive move towards higher rates, the USD might find it challenging to advance further. Later today, we'll see the weekly claims and data on July's Durable Goods at 8:30ET, followed by the KC Fed Manufacturing Index at 11ET. The market is likely to remain in a “wait and see” mode ahead of tomorrow's updates.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The CAD isn't performing as well today, mirroring the mild downturn seen in other commodity currencies. While consistent stock and crude prices might offer some stability to the CAD, the spreads have slightly shifted towards the USD, especially after yesterday's Canadian Retail Sales data. In the near term, expect trading to remain within a familiar range as the market anticipates Powell's input. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">Overnight, the EUR/USD has seen limited movement as markets process yesterday’s decline due to weak PMI data. The lackluster data has slightly tempered the anticipation of an ECB rate increase on September 14th. Still, the market does factor in a small possibility of this hike and remains evenly split on the chance of another 25bps increase before the year concludes. Nonetheless, the narrowing of short-term yield spreads has diminished the potential for a significant near-term surge in the EUR.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The GBP is experiencing a slight pullback today, as market wariness before Powell's upcoming comments counteracts the sudden rise from yesterday's low point. Recent CBI survey data from the UK, which indicates a softer retail landscape in August, could contribute to short-term challenges. However, the markets are likely to remain subdued as they await tomorrow's potentially impactful events.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD is firmer against major currencies, though below its overnight peak. A swift rise in the DXY occurred in Asian trading, driven by significant EUR sales. This momentum has since mellowed in European trading. The spotlight today is on Fed Chairman Powell's speech at Jackson Hole. Post the recent hawkish FOMC minutes, he might strike a balanced tone. While some think the Fed has acted sufficiently, Powell might still hint at more tightening possibilities. Currently, the market sees only a 20% chance of a 25bps hike on September 20th. Depending on Powell's message, the USD could strengthen significantly or continue to remain in its current trading range. Other key figures like Harker, Mester, Goolsbee, and ECB's Lagarde will also speak today. Interestingly, recent data indicates the USD's global transaction share rose to 46.5% in July, emphasizing its dominant role in global payments.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The CAD remains slightly weak but has seen very little change in the overnight session. Other commodity currencies have somewhat countered the USD's general rise overnight, gaining traction due to stronger stock and crude oil prices. With no local data available and all eyes on Fed Chairman Powell's remarks, the CAD's movement is primarily influenced by external factors such as the overall mood around the USD and short-term market sentiment. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">In early Asian trading, <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> dipped below 1.08, marking its lowest point since mid-June. This decline occurred despite a subsequent modest recovery in the EUR. A Reuters report cited ECB "sources" suggesting a growing momentum for a rate halt, and Germany's August Ifo survey indicated a drop in business confidence (85.7 this month compared to the expected 86.8). However, the EUR found some support due to a slight narrowing in short-term EZ-US spreads during the session. This support came despite the mentioned ECB news and the unfavorable German data, pulling the spot close to 1.08 as our session commences.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> saw a decline during overnight trading, slipping below 1.26 following the close of the North American session on Thursday. However, UK data released late yesterday indicated a surprising boost in consumer confidence, albeit still weak, which might have alleviated some of the downward pressure on Sterling. The Gfk index rose to -25 this month, up from -30 in July, bolstered by increasing wages. While GBP remains somewhat vulnerable, it has rebounded from its overnight low, approaching 1.26 again as we await Powell's comments. It's worth noting that BoE's Broadbent is scheduled to speak at Jackson Hole tomorrow at 12.25ET.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The recent USD rally seems to have paused after the Jackson Hole central bank symposium. Although recent Fed talks showed a data-dependent approach without urgency to tighten policy, markets still expect limited Fed action in September, thinking the tightening phase is near its end. China's efforts to stabilize the CNH might also reduce the appeal of the safe-haven USD. Yet, it's early to be pessimistic about the USD. Positive US data this week could raise expectations of a hawkish Fed stance, boosting USD. Today's focus is on the August Consumer Confidence index and July JOLTS data, which, if positive, can emphasize the US labor market's role in supporting consumer confidence.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">Yesterday, the US dollar traded between CAD1.3570 and CAD1.3610, maintaining its range from the previous weekend. The peak reached last week was around CAD1.3640. Technically, a drop below CAD1.3560 would be significant. The CAD's movement is expected to hinge on upcoming data. Attention in Canada turns to the Q2 GDP report due this Friday. Analysts anticipate a deceleration in economic growth, which might prompt the Bank of Canada (BoC) to reconsider its interest rate hikes, even with recent inflation spikes. The BoC's next decision is expected on September 6. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">As the ECB's September policy meeting nears, hawkish members advocate for further tightening, likely driven by market expectations for a potential ECB hike. The implied probability for a September action remains under 50%. While President Christine Lagarde maintained a hawkish stance in her recent Jackson Hole speech, overlooking signs of the eurozone's slowing economy, markets are now closely following the ECB's data-dependent approach. The upcoming inflation figures will be crucial in determining expectations for a September hike.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The pound began the week with a slight gain, bolstered in part by the hawkish remarks from Bank of England Deputy Governor Ben Broadbent at Jackson Hole. Broadbent emphasized that inflation might not decelerate as rapidly as it surfaced and that the monetary policy should remain restrictive for an extended period. Moreover, the pound is benefiting from a cautious risk-on and dollar-off sentiment as London markets resume following a UK national holiday. Given a light UK calendar this week, the GBP is expected to be influenced mainly by external events.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">USD continues its range-bound trade as markets await Friday's key August Non-farm payrolls. FX markets face mixed influences. Positive factors for the USD include anticipated hawkish Fed stances, enhancing its rate appeal, and potential month-end rebalancing. Negative factors include China's measures to support its economy, lifting global risk sentiment and decreasing USD's safe-haven demand, and expectations of other central banks tightening rates, weakening the USD's relative appeal. Today, investors will eye the ADP data and Q2 GDP's second print. The consensus hopes to see signs of a US labor market slowdown in August. A major downside surprise might prompt markets to reevaluate their Fed perspective. A positive surprise could notably sway the <a target="_blank"  href="https://www.mtfxgroup.com/fx-daily/markets-rangebound-ahead-of-friday-s-us-payroll-data/">FX market</a>, particularly if it impacts rate markets. However, ADP's predictability for NFP is questionable, so its effect may be short-lived.</p><h3 style="text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">Yesterday, the US dollar traded in the mid-1.35s, maintaining its range from the previous weekend. The peak reached last week was around CAD1.3640. Technically, a drop below CAD1.3560 would be significant. The CAD's movement is expected to hinge on upcoming data. Attention in Canada turns to the Q2 GDP report due this Friday. Analysts anticipate a deceleration in economic growth, which might prompt the Bank of Canada (BoC) to reconsider its interest rate hikes, even with recent inflation spikes. The BoC's next decision is expected on September 6. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p><h3 style="text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">Today's eurozone inflation data will offer CPI stats for Spain and Germany. Spain's inflation is likely to rise slightly from 2.3%, with a focus on the high core inflation predicted to decrease from 6.2% to 6.0%. Germany's figures, expected to drop similarly, will have a major market impact. The euro's fate is at a crossroad, with nearly a 50% market expectation of another interest rate hike in September. If the European Commission skips the September meeting, rate hikes will become more challenging given the declining eurozone economic prospects. Expect the EUR/USD to approach the 1.0900-1.0950 range before the US payrolls on Friday.</p><h3 style="text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The absence of local data releases means the pound has been driven primarily by global trends. A decline in the dollar yesterday pushed the GBP/USD past 1.2650, though its surge was more modest than its counterparts. This morning, the GBP/USD is slightly lower, in tune with other dollar pairs, but the pound's current response to risk mood seems somewhat restrained. On the data front, it's advisable to monitor July's mortgage approval numbers and related credit data. Rising interest rates and a drop in loan demand have already initiated a housing price adjustment in the nation.</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD has faced challenges following two successive days of disappointing US statistics. This has led many FX traders to believe that the Federal Reserve's tightening phase may have peaked, with the next step possibly being a rate cut, perhaps as early as Q224. The anticipated FX support from end-of-month rebalancing at the close of August hasn't materialized as expected. Today, attention will shift to the July PCE deflator data, the latest jobless claims data, and speeches from the Fed’s Susan Collins and Rafael Bostic. Before the release of the PCE data, general market predictions indicate a resurgence in both the main and overall yearly inflation rates. The unemployment claims might further emphasize the US labor market's robustness. Regarding the FX market's response, it will likely hinge on how the new data matches predictions. Signs of persistent inflation or an enhanced labor market could boost US rates &amp; yields, stabilizing the USD. On the other hand, additional economic setbacks could further weigh down the USD.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">After peaking around CAD1.3640 last week and holding steady on Tuesday, the US dollar dipped to CAD1.3515 yesterday. A descent past the CAD1.3495-CAD1.3500 range might indicate a push towards the 1.3450-60 zone. Fundamentally, while Canada's current account usually isn't a focal point, the deficit seems poised to double from Q2 to Q3. This could hint at a softer Q2 GDP, to be announced on Friday. The US dollar could face initial resistance around CAD1.3565-75 today. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">In August, the EUR stood strong against the rising USD among the G10 FX. This strength is largely attributed to the market's expectations of another ECB rate hike by year's end, reflecting the Eurozone's continued inflation pressures. The main focus today is on the Eurozone's preliminary HICP inflation for August. Market analysts expect the headline inflation to stay around 5.3% YoY, while core inflation might drop to 5.3% YoY. Focus will also be on remarks by ECB’s Isabel Schnabel and Luis de Guindos, and the July ECB policy meeting report. If the data suggests a hawkish tilt in September, the EUR might benefit.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The pound closed above its 20-day moving average (around $1.2700) for the first time this month, touching close to $1.2750 amid a widespread dollar decline following weak data. After surpassing the $1.27 mark, it maintained that level, though it seems to have a downward trend today. During the European morning, it hit session lows near $1.2675. Support is anticipated between $1.2630-50.</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">Today's focus is on the Non-farm payrolls and the August manufacturing ISM. Market analysts predict an increase of 165k, down from 187k in July and just below the general forecast of 170k. Moreover, the market anticipates a deceleration in average hourly earnings growth to 4.3% YoY from July's 4.4%. Most also suspect that the unemployment rate might increase slightly to 3.6% in August from the previous 3.5%, even though the general consensus expects it to remain unchanged. Concerning the manufacturing ISM, there's an expectation for a modest rise to 47 in August from 44 in July, although this would keep the index in the contraction zone. Investors will be keenly observing today's US data, searching for further indications that the US economy is on track for a gentle slowdown. If the data aligns, it will reinforce the soft-landing scenario and bolster the perspective that the Fed's tightening phase might have reached its climax, making a rate reduction the likely next step. However, given recent trends in both the FX and rates markets, it seems this expectation is already factored into the USD's value. Hence, only unexpected data shifts will likely influence the USD today, with the currency continuing to mirror US rates and yields.</p><h3>CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">Last month, the CAD performed better than its commodity currency counterparts, though it dropped to its lowest level against the USD since May. Despite the CAD's resilience, escalating risk aversion led to its decline, and consistent rate differentials didn't support a rebound in the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a>. Notably, recent domestic data underscores the robustness of the Canadian economy, which today's GDP numbers might further highlight. Although the growth for Q2 2023 might not have met the BoC's forecast (1.0% vs. 1.5% QoQ), any early signs of an uptick in July's activity could bolster hopes of a GDP revival in the second half of 2023. This could maintain the possibility of a final BoC rate increase, though external factors might ultimately have a more significant influence on the bank's decision-making. Unless there's a prolonged wave of risk aversion in global markets, strong domestic factors could enable the CAD to recover some of its August losses.</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The dollar's rise shows no sign of slowing. Yesterday, the DXY soared to its highest position since March, driven by a rise in US yields, while the FX market is also feeling the impact of escalating energy costs. This week, Saudi Arabia confirmed its intention to extend its 1 million barrels per day supply reduction until December, making the crude energy market conditions tighter and pushing Brent's trading price above $90/bl. The US's self-sufficiency in energy and its status as a net exporter solidify the dollar's strength in this high-energy-price environment. The immediate threat to the dollar would possibly arise from a significant shift in growth outlooks. This context underscores the importance of today's release of the ISM services index for August. A notable downturn in this index impacted the dollar significantly last year. However, unless there's an unexpected drop below 50 in today's reading, it's likely the dollar will sustain its recent advances, especially leading up to next week's US August CPI release.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">USD/CAD printed the highest level since March yesterday, momentarily surpassing the 1.3660 mark from April, propelled by a stronger USD and a general decline in pro-cyclical currencies. We don't anticipate today's Bank of Canada meeting to pivot the direction for the CAD, given the recent economic slowdown and a tempered job market. Market expectations have already tilted towards a dovish stance with a prevailing belief that there will be no change today. This suggests limited downward risk for the CAD from today's status quo, especially since the BoC may want to leave the possibility of future tightening open. Despite the rise of <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> recently, there hasn't been a corresponding shift in the short-term disparity for USD/CAD. Currently, the pair appears overvalued by 2.5% based on immediate fair value estimates. We're leaning towards a pullback to the 1.3460 200-day MA for September.</p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro&nbsp;</h3><p style="text-align:justify;">The term 'stagflation' is increasingly used to describe the Eurozone's economy. This scenario is negative for the growth-sensitive euro, reminiscent of challenges faced during its inception in 1999. Adding to that story is now the supply-driven spike in energy, reviving fears of last summer's negative terms of trade story for the euro. With natural gas prices still very subdued, this energy story will not hit the euro as hard as last year, but it remains unwelcome. The market predicts a 25% chance of the European Central Bank (ECB) increasing rates by 25bp next week. Yet, given the energy dynamics and speculative positioning, <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> seems susceptible, potentially dropping to around the 1.0635/40 range.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">GBP is coming under pressure against the strong dollar and marginally outperforming the pressured euro. High wage growth looks to be the primary reason for the market retaining expectations of a further 57bp of Bank of England (BoE) tightening in this cycle – making pivotal next Wednesday's release of the average earnings figures for July. Our base case is one more 25bp hike from the Bank on 21 September and then a prolonged pause. <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=GBP">GBP/USD</a> looks more vulnerable to a firm test of 1.2500 psychological support.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">U.S. data released today typically doesn't sway the markets much. The metrics concerning unit labor costs and productivity are based on Q2 GDP figures. It's notable that the Q2 GDP was recently revised down to 2.1% from 2.4%. Although weekly unemployment claims could pique some interest, the significance might be limited. The numbers for these claims have dropped over the past three weeks, landing at 228k, with the four-week rolling average at 237.5k. The peak for this four-week average this year was in June, approximately 257k. Today, while the markets are active, four regional Fed presidents will share their insights. Among them, three (Harker, Goolsbee, and Williams) are voters, with Bostic being the fourth. Their perspectives are largely understood. After market hours, Fed Governor Bowman will participate in a panel discussing the future of currency.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The Bank of Canada maintained a hawkish stance in line with expectations, following rate increases in both June and July. The Bank acknowledged that while demand is exceeding supply, domestic demand actually went up in the second quarter, even though GDP shrank by 0.2%. The Bank also signaled that it is ready to raise interest rates if measures of core inflation do not decline. According to the swaps market, there's roughly a 50% chance that the Bank will increase rates in either the October or December meetings; these odds remained virtually the same by the end of the trading day. Data on July's building permits and August's IVEY survey are taking a back seat to the much-anticipated jobs report due tomorrow. After a loss of 6,400 jobs in July, a recovery is anticipated. Bloomberg's median forecast suggests an increase of 17,500 jobs, a figure that is considerably less than the monthly average job growth of around 40,600 through July. It's worth noting that the second-quarter GDP contraction might give an exaggerated impression of economic deceleration. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;text-align:justify;">Technical Analysis</h3><p style="text-align:justify;">The greenback is consolidating its recent surge against the Canadian dollar near five-month highs. It is trading in a narrow range so far today (~CAD1.3630-55). A break of CAD1.3700 could see CAD1.3800-20.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD bull-run continues fuelled by better-than-expected US data. In that, the data is helping the currency by underscoring the cyclical divergence between the US and the rest of the world rather than fuelling Fed rate hike expectations. These developments have resulted in a growing relative rate advantage for the USD and are further supported by the latest oil price rally that is seen as largely neutral to even somewhat positive for the US economic outlook. In contrast, higher crude prices are seen as fuelling stagflation risks for the economies of energy importers like the Eurozone, Japan and the UK. On the day, the US calendar is relatively light and focus will be on the speech by the Fed’s Michael Barr. All of this suggests that the USD will continue to take its cue from the evolution of its relative rate and yield spread to the rest of G10 as well as the ebb and flow of market risk sentiment. The ‘USD smile’ has firmly reassessed itself as the key template for FX markets and the USD could continue to move closer to its extremes either because of its growing rate advantage or because of a further spike in risk sentiment.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">BoC Governor, Tiff Macklem, followed the BoC’s unsuccessful attempt at a hawkish hold on rates with an equally unsuccessful hawkish hold speech. While Macklem said the central bank is “prepared to take further action” and that it remains concerned about sticky wages growth and the recent reacceleration in inflation, he also pointed out that the victory over inflation is “now in sight”. Macklem also indicated a pause made sense at this time given that previous rate hikes are working their way through the economy. Macklem acknowledged the pain in certain sections of the community. While the BoC is independent, Macklem could be feeling the political heat. Before the meeting on Wednesday, premiers of British Columbia, Ontario and Newfoundland and Labrador all wrote public letters urging the BoC not to hike rates. After the meeting, Finance Minister, Chrystia Freeland, said it was welcome relief for Canadians. The Canadian labour market data released later today will help determine how credible the BoC’s hawkish hold is given strong labour market would give it political cover to hike rates further; if it needed such cover and if it needed to hike rates further. Back in July, the impact on rates and the CAD of an in-line uptick in the unemployment rate and surprising decline in net employment was offset by a steep pick-up in average earnings to 5% YoY. Both series can be quite volatile from month-to-month, but the latter possibly carries greater importance, at least for the BoC’s reaction function. Any evidence that wages growth continues at a faster pace than expectations of Canadian firms for the year ahead (around 4.5%) would bolster the credibility of the BoC’s hawkish hold and give the CAD some much needed support. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD begins the week on a cautious note as its surge in the DXY halts near the 105 mark. The dollar's progress from the previous week hinted at a possible prolonged rally, particularly as other currencies with less promising growth outlooks were sidelined. The US Federal Reserve's sustained high policy stance coupled with escalating oil prices have given the dollar a boost. This week, attention is centered on the US Consumer Price Index (CPI) data on Wednesday and the European Central Bank (ECB) policy announcement on Thursday. It's anticipated that headline prices for August will rise (+0.6% M/M and +3.6% Y/Y) due to increased gas costs, while core prices are predicted to maintain a steady increase of 0.2% monthly – marking the third consecutive month. This consistent monthly rate aligns more with stable pricing, reinforcing the Fed's belief that they are successfully combating inflation. It's worth noting that the Wall Street Journal's Fed analyst, Timiraos, mentioned a significant change in the Fed's rate position, hinting at a potential pause in their upcoming meeting. On the other hand, the forthcoming ECB policy announcement on Thursday seems less daunting for the dollar, given the undermining of rate hike expectations by weak growth figures. Nonetheless, ECB policymakers, with their eyes on inflation, remain steadfast. Knot, a policy hawk, suggested last week that the markets may be undervaluing a potential rate hike. If US inflation remains tame and the ECB enacts a 25bps rate hike on Thursday, the dollar might face some challenges.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Strong employment statistics on Friday provided a boost to the CAD. However, the extensive short-term spreads between the US and Canada continue to place a burden on the CAD. Despite steady oil prices, they aren't offering significant support to the CAD, especially since it has declined even with generally stable commodity prices throughout August. Today, the CAD has gained slightly against a somewhat weaker USD. Still, it trails behind its commodity counterparts and is primarily influenced by external factors, such as US data and yields, for the time being. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro</h3><p style="text-align:justify;">The EUR has slightly increased, aligning with the overall weaker USD sentiment today. However, the spotlight for investors is clearly on the upcoming ECB policy decision, anticipated to significantly influence the EUR's trajectory. While there was a previous market anticipation of a 1/4 point increase on Thursday, it has dimmed due to subdued Eurozone activity figures. Nonetheless, policymakers are zeroing in on inflation, which has remained consistent at approximately 5% for both headline and core figures. The probability of a 25bps hike might be greater than what the current market expectations (around 10bps) suggest for Thursday. If the ECB decides against an increase this week, their communication might still lean towards a more hawkish stance.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">Sterling is showing a slight increase in today's session, mirroring the overall trend in major foreign exchanges for the day. Data from the UK, set to release tomorrow (covering employment and wages), might offer a deeper understanding of the Bank of England's (BoE) policy intentions for this month. Wage growth continues to be persistent, and data for July is projected to match June's rate of 8.2%. It's worth noting that, excluding bonuses, average weekly earnings previously saw a record increase of 7.8%. Current market predictions indicate a high likelihood (around 80%) of a 25bps rate hike on September 21, with some speculating that the peak in rates could even reach a higher point, possibly 5.75%.</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The USD is showing strength in today's trading session, though the momentum is subdued as the market anticipates tomorrow's US CPI data. Most of the major currencies have experienced slight declines against the dollar due to a mild risk-averse sentiment. Bond markets are also witnessing strong support. The USD's upward trend continues, with today's gains offsetting some of its recent declines from the 105 level. As of now, there's no clear indication that the USD rally which began at the end of June is slowing down. However, the currency may be vulnerable to any unexpected data in the near future and seems to be slightly overvalued when compared to its yield differentials against other major currencies. This could make it challenging for the USD to gain further without a solid fundamental reason. The NY Fed's recent Household Survey indicated a tightening in credit standards and an increased expectation of job losses, suggesting that the rising rates are affecting the economy. The data release calendar remains light today, but significant data, including the US Retail Sales, is expected later this week.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD has remained steady in overnight trading, showing almost no change for the session. Without significant domestic data being released, external factors like the overall USD sentiment and market risk appetite will predominantly determine its immediate direction. The fluctuating market sentiment and the broader short-term yield differences, especially the approximate 30bps premium for US 2Y bond yields, seem to hinder the CAD from strengthening. These factors are balancing out the positive changes in Canada's trade terms over recent months, which could have potentially boosted the CAD. As of this morning, we estimate its fair value to be 1.3373. <span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;">Observe the </span><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a><span style="background-color:rgb(255,255,255);color:rgb(112,112,112);font-family:&quot;Ciutadella Rounded&quot;;"> trends.</span></p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro</h3><p style="text-align:justify;">In September, Germany's ZEW survey showed a rise to -11.4, marking the second straight month of an uptick in investor confidence, even though it remains subdued. The outcome for this month surpassed market anticipations, which predicted a decline to -15. On the other hand, the Current Situation metric declined to -79.4, indicating a sluggish economic pace. Although the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> slightly decreased during the overnight session, it's expected to maintain its resilience against minor downturns for the time being.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The collection of UK data released this morning presented a diverse picture. On one side, the August employment figures were weaker than anticipated, with payrolls decreasing by 1k and the unemployment rate slightly rising to 4.3% from 4.2%. Conversely, the July Average Weekly Earnings increased by 8.5%, and June's figure was revised upward to 8.4%, surpassing market expectations of 8.2% for July. Wages excluding bonuses remained consistent at 7.8%. Despite the earnings data, UK markets, including the GBP which is lagging today, appear to be more influenced by the employment figures. However, the Bank of England's determination is noteworthy, with swaps still indicating about an 80% chance for a 25bps increase on September 21st.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">Markets are cautious with the USD strengthening ahead of the US CPI report due today. Globally, stocks have declined, and bonds are not faring well. There isn't much activity in the major currencies, and they are mostly staying within their recent boundaries. There's a palpable concern in the markets that the data released this morning might indicate persistent inflation in the US. It's projected that the main prices will see a 0.6% increase for August, translating to a 3.6% increase annually. This expected surge is attributed mainly to rising gasoline prices. On the other hand, core prices, which exclude volatile items, seem to be more stable with an anticipated 0.2% increase for the month and a drop to 4.3% annually from 4.7%. If core prices increase by 0.2% for the third consecutive month, it would be the smallest sequence of monthly gains since the end of 2020. This would likely be viewed positively by policymakers, interpreting it as a sign that the rate of price growth is slowing down. The main focus for markets might be on these low core prices rather than the main data's surge. Policymakers might not immediately react to this surge. If the general expectations are accurate, this could put some strain on US interest rates and the USD. From a technical perspective, the broader performance of the USD will probably depend on whether the DXY index can surpass 105 or fall below the 104.50 support following the data release.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">The CAD hasn't shown much movement during the overnight session, hovering within a narrow bracket around the mid to upper 1.35s. Higher US yields after this morning’s US CPI data could weigh on the CAD. Crude oil prices are on an upward trend due to concerns about supply constraints, with WTI approaching $90, a peak not seen since last November. While the increasing energy prices don't seem to be boosting the CAD significantly right now, they could slightly favor the CAD if the USD declines. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> remains relatively stable in the low 1.07 range, but it saw a slight dip after the announcement of disappointing Eurozone Industrial Production figures. The production declined by 1.1% in July, compared to the anticipated 0.9% decrease. Additionally, the unexpected 0.5% increase in June was slightly adjusted to 0.4%. Given the recent lukewarm PMI reports, the slump in the industrial sector isn't unexpected. As a result, the decline in EUR should be limited, especially before the release of the US data report.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">Sterling dropped to a three-month low, hovering in the low 1.24s, after the UK released GDP data that came in below expectations. For July, growth decreased by 0.5% and only rose 0.2% when looked at on a rolling quarterly basis—both figures missed their estimates. The outputs from manufacturing, services, and construction all declined during the month. On the brighter side, the UK announced a trade deficit that was less than anticipated for the month, with a deficit of GBP14.1bn compared to the expected GBP15.9bn. Although Sterling managed to rebound from its initial post-data dip swiftly, it maintains a subdued tone throughout the session. The OIS projections for the upcoming BoE meeting remain steady at 20bps.&nbsp;</p>

<h3 style="margin-left:0px;text-align:justify;">USD - US Dollar</h3><p style="text-align:justify;">The FX market has been quiet overnight in anticipation of today's significant financial events. The USD has seen a slight increase, largely due to a dip in GBP following subpar UK housing statistics. However, most major currencies are fluctuating within a +/- 0.1% range for the day at the time of writing. US stock futures are showing a slight upward trend, while bond performance is varied, with Treasurys lagging a bit during this session. US CPI data from yesterday offered varied insights: there was an increase in overall prices, an unexpected rise in core inflation (though at a decelerating rate), and indications of price stabilization. In essence, this data hasn’t really shed new light on anticipated policy changes. The market consensus is that the Fed is unlikely to raise rates next week, with a split opinion on any further rate adjustments before the year closes. Reports on US Retail Sales, PPI, and weekly claims will be released today, but the focal event might be the FOMC decision on the 20th. Additionally, the ECB's policy decision at 8.15ET might introduce some market volatility. As of now, the DXY remains within the 104.50/105 bracket highlighted yesterday, and any significant movement outside this range could provide a clearer market direction.</p><h3 style="margin-left:0px;text-align:justify;">CAD - Canadian Dollar&nbsp;</h3><p style="text-align:justify;">This morning, the CAD is outpacing most G10 currencies against the USD, boasting a 0.11% increase according to the Bloomberg table. The overall stability of the USD, consistent stock performance, a mild increase in crude oil prices, and slight gains across other commodities hint at a more optimistic trend influencing the CAD. However, the current spot appears to be valued higher than its equilibrium, which stands at 1.3349 today. For the CAD to experience a notable surge, we'd need to see better short-term spreads or a broader decline in the USD's strength. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;text-align:justify;">EUR - Euro</h3><p style="text-align:justify;">The ECB's policy decision today is anticipated to maintain current rates, based on a Bloomberg economists' survey. However, recent market data suggests a 65% chance of a 16-17bps tightening. A divergence in expectations is evident. We’re leaning towards a 25bps hike due to persistent inflation, with rates hovering around 5%. This likely will be the cycle's final hike, but President Lagarde might not rule out further tightening. The gap between Eurozone/US 2Y spreads has reduced since late August, which should've buoyed the EUR somewhat. A significant narrowing in the EUR's favor may arise from decreasing US yields.</p><h3 style="margin-left:0px;text-align:justify;">GBP - British Pound</h3><p style="text-align:justify;">The GBP is lagging behind other G10 currencies, following a drop in the August RICS House Price Index to its lowest level since 2009, as indicated by data released yesterday. The decline to –68 in the index, which has been negative since last October, underscores the impact of increased rates on the housing sector. Although expectations for a BoE rate hike have slightly reduced after this data, swaps still project an 18bps tightening for the upcoming week.&nbsp;<br>&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Markets are steady as they await the FOMC's announcement tomorrow. The USD is slightly down today after showing little movement in either direction yesterday. Equities are seeing a small uptick, and bonds are generally well-backed. While crude oil has come down from its peak earlier in the session, it continues its overall upward trajectory. As we approach the Federal Reserve's decision, the market sentiment seems positive. While the Fed might not lean dovish, it would take significant supportive data to propel an already high-priced USD – especially when compared to its short-term yield differentials with major currencies – even further. US yields are approaching critical points, and it seems a lot of optimism is already baked into the USD's value. The DXY had a nine-week consecutive climb until last Friday, a streak that often suggests a market is due for a consolidation or correction – and this seems to be happening now, at least in anticipation of the Fed's announcement.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The upcoming August CPI data might raise concerns for the BoC. The anticipated monthly increase in headline prices is 0.2%, with analysts forecasting a year-on-year inflation rate jump to 3.8%. The surge in headline prices is mainly attributed to rising gasoline prices and less favorable base-year comparisons. However, core prices are projected to stay fairly consistent with July's figures; the core Trim metric might see a slight rise to 3.7%. Current market predictions indicate a slightly more than even chance of a BoC rate increase before the year concludes. While the threshold for another rate boost is substantial, a further change in swaps could provide a short-term boost to the CAD. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> remains relatively stable, hovering around 1.07. The final CPI data from the Eurozone indicates a dip in inflation to 5.2% Y/Y, compared to the initial 5.3% reported for August. The core price settled at 5.3%. While the slight decline in inflation underscores the ECB's neutral stance, the persistently high figures suggest that policy levels might stay high for a foreseeable period. The EUR remained unaffected by this data. Looking ahead, beyond the Federal Reserve's decisions, the next significant data for the EUR could be the preliminary Eurozone PMI figures set to be released on Friday.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Sterling remains relatively stable in today's session, maintaining a tight range just below 1.24. The CPI data for August, scheduled for release tomorrow, might pose challenges for BoE officials before the rate decision on Thursday. Increases in headline prices and consistent core inflation figures are anticipated. Current swap markets indicate an 80% chance of a 25bps increase on Thursday, with a strong consensus foreseeing a 1/4 point hike (only one of the 56 participants in the Bloomberg survey predicts no adjustment). Sterling might exhibit a slight downward bias in the near term as investors weigh high inflation data against the possibility that the BoE's rate cycle could be nearing its peak.<br>&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD is lower on the session, while European shares and US futures are gaining. Bond markets in major regions are also marginally stronger, but crude oil prices have decreased, with WTI now below $90. The environment appears stable in anticipation of today's FOMC meeting. It's expected that the Fed will maintain its stance, likely ending the tightening cycle at a probable 5.50%. Based on remarks from the Fed Chairman at Jackson Hole, persistent inflation means they won't rule out more tightening, with this year's projected average possibly staying at 5.625%. This is in part to shape market anticipations about a potential policy shift. Projections for 2024 might stay the same, but some tightening estimates may be reduced due to signals that the Fed is nearing its objectives. Economic growth might see an upward revision, whereas primary inflation forecasts might be lowered. It's worth noting that the anticipated Fed fund rates for next year align closely with the present median prediction of 4.625%, so alterations here could influence market responses. Currency markets might experience some turbulence from related news, but initial reactions to recent policy shifts haven't always indicated the long-term trend. The current valuation of the USD seems in line with the expected "business as usual" outcome for near-term policy decisions. A pronounced hawkish stance would be needed to substantially boost the USD. If that doesn't occur, there might be speculation on potential challenges, like the UAW strike or a government shutdown, and their impact on the US economy and the USD in the upcoming quarter.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Canada continues to grapple with inflation issues. This might lead to further monetary adjustments. The significant increase in the Consumer Price Index (CPI) for August, combined with the robust job figures, indicates that previous tightening measures haven't adequately curbed the economy's vigor. Prices are on the rise once more, and this isn't solely due to housing or fuel costs. Based on the data, there's a slightly more than even chance of the Bank of Canada (BoC) implementing tightening policies in October. Meanwhile, an increase of 20 basis points is expected in December, and almost a complete 25 basis points is anticipated for January. This information further bolstered the already rising Canadian dollar, as the yield differences between US and Canada narrowed notably. The threshold for another rate increase seems to have lowered more than initially assumed, indicating that swap valuations might need to reconsider the possibility of sooner or more vigorous monetary tightening. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> is showing slight gains in this session, yet the absence of domestic news or updates today means markets have minimal motivation to shift their ranges. The upcoming major domestic data release is the preliminary PMIs for the Eurozone in September, which will be out on Thursday. This data might indicate some steadiness after recent subdued activity trends.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Sterling is lagging in performance during this session, though its decline against the dollar remains modest for the day, with sterling recovering from its earlier drop. The UK's CPI data came in lower than anticipated, registering a 0.3% increase in August, as opposed to the predicted 0.7%. This reduced the year-over-year rate to 6.7%, down from 6.8% in July and against a forecast of 7.0%. Given this, the market anticipations for the upcoming Bank of England (BoE) decision have been toned down, with only an 11 basis point tightening being priced in. However, it's uncertain if a single data report will allay concerns about wider inflationary trends, like wages. An interest rate increase seems more probable than the 11 basis point adjustment the Overnight Index Swaps (OIS) pricing currently suggests.&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The Fed maintained interest rates steady but surprised with a hawkish stance, hinting at upcoming rate hikes in 2023. This shift, along with upward revisions in the Fed's dot plots for the next few years, triggered a sharp rebound in the dollar, a surge in U.S. Treasury yields to multi-year highs, a flattening of the yield curve, and a notable drop in stocks.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> volatility picked up after the Fed's rate decision to keep interest rates unchanged. The Canadian Dollar (CAD) could not hold on to recent gains against the US Dollar, as the Federal Reserve, while keeping rates unchanged, revised its interest rate outlook for 2024. Can oil at current prices prevent the loonie from sliding back to the yearly lows?</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The Euro reversed from its overnight high of 1.0735, succumbing to the impact of the US Fed's decision. Market participants abandoned the Euro and flocked to the USD in response to the Fed's updated rate projections.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">The GBP had a tough day, with its decline initiated by data showing a slowdown in UK inflation to 6.7% in the year to August. The currency faced additional downward pressure after the Federal Reserve's policy announcement and updated forecasts on Wednesday. The upcoming BOE meeting today will be closely monitored for insights into future rate guidance.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD continues to remain firm with the DXY trading near its peak from yesterday, seemingly ready to secure a tenth straight weekly gain. US yields reached new cycle peaks following the Federal Reserve's decision on Wednesday and are holding onto gains, surpassing their former 2023 highs. The 'high for longer' narrative, emerging post-FOMC decision, supports the USD. However, even with yields surpassing recent highs, the overall valuation of the USD appears somewhat inflated. This overvaluation, even short-term, combined with the ongoing rise of the USD over the last two and a half months, makes the prospect of a more significant USD consolidation very plausible, especially considering the risks of strikes and government shutdowns. In the current session, the USD remains solid against the core major currencies. The stock market performed suboptimally yesterday due to increasing yields; European stock markets are showing weakness, but US equity futures are in positive territory, and crude prices have bounced back. Now that the Fed’s “quiet period” has concluded, remarks from Cook (voter), Daly (non-voter), and Kashkari (voter) are expected to surface today.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD has held a small gain over the USD in this session, having retraced to the 1.35 area on Thursday. It has recovered well from the intraday low of the previous day despite the prevailing strength in the USD. The slack in stocks has to some degree influenced CAD sentiment, but the steadfast and somewhat contracting US-Canada spreads are providing stability to the CAD. Domestic yields are more robust, a reflection of the CPI data surpassing expectations, and aiding in maintaining spreads. July Retail Sales data from Canada will be released this morning; a rise of 0.4% is anticipated, consistent with the preliminary data unveiled with the slightly upbeat report in June. However, sales excluding autos were weak in June, and volume sales were in the negative. The pressure from interest rates on consumers is tangible; however, with employment and wages remaining stable and savings depleting, the resilience in retail activity could persist. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">Preliminary PMI data from the Eurozone for September presented a somewhat mixed picture, remaining overall subdued. The activity data from France was generally below expectations, causing France's Composite to reach 43.5, compared to a forecast of 46.0. Conversely, most German data outperformed expectations and showed improvement from the previous month—although the key indices all stayed below 50. Consequently, the preliminary Eurozone Composite index for the month was slightly above the projected 46.2, while Manufacturing dropped to 43.4, against a forecast of 44.0, and Services saw a modest rise to 48.4, compared to the anticipated 47.6. While this denotes marginally better news, it doesn’t suggest any significant alterations in the lukewarm economic outlook. The EURUSD continues to consolidate losses around the low 1.06 support zone, potentially indicating that much of the negative news may already be factored into the EUR’s value.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Reports on UK data presented a combination of mixed to weaker results. Retail Sales experienced a 0.4% increase in August, which is slightly below the forecast. Meanwhile, the PMI data for September were largely unsatisfactory; although Manufacturing did see a recovery to 44.2 from August’s dismal 43.0, Services declined to 47.2 (from 49.5), and the Composite index fell to 46.8 (from 48.6 the previous month), marking a new low in the post-Covid era. The underwhelming data, coupled with potentially escalating concerns about a recession, will maintain pressure on the GBP, following its decline subsequent to the BoE’s decision to keep rates steady.<br>&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p>The momentum of the dollar continues to significantly influence overall foreign exchange (FX) movement. The longstanding market saying, “don’t fight the Fed,” is particularly apt. Currently, DXY-weighted 2-year spreads are lower than they were a month ago when the index was trading around 2% lower. DXY-weighted 10-year spreads have seen a widening and seem to be presently fueling broader gains in the USD. &nbsp;Last night, Fed hawk Kashkari mentioned anticipating one more rate increase this year. There's a high likelihood for continued, albeit possibly short-term, strength in the USD, propelled by existing momentum. However, there’s also a chance that shift in positioning and sentiment might leave the markets susceptible to a drop in the USD should there be any unfavorable fundamental developments—such as a couple of weak data prints—or even a possible US government shutdown. On Monday, Moody's remarked that a US government shutdown would adversely affect the US’ credit rating. This morning, there are indications that moderate Republicans may collaborate with Democrats to minimize the duration of an increasingly probable shutdown. The price movement overnight is indicative of weakened stocks and a strong USD. In the short term, price indicators are suggesting a potential temporary pause in the rise of the USD.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p>Spot edged up to test 1.35 in European trade after Asian dealing took the USD lower to test the mid-1.34 area. Weak risk appetite and some further drift in crude oil prices are headwinds for the CAD, in addition to the general strength in the USD. The CAD is a moderate underperformer on the session so far among the majors but it has been showing resilience &nbsp;against its major currency peers recently— pressuring the GBP, EUR and JPY and also gaining on the MXN which is showing signs of reversing its recent run higher. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p>The EUR remains relatively stable today, hovering around the 1.06 mark after a brief decline in early European transactions. There have been no data reports emerging from the Eurozone this morning. Remarks from ECB policymakers reinforce the projection of no subsequent rate increases (Muller) but emphasize that the central bank is not hastening to deliberate rate reductions (Simkus).</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p>Sterling is weak but has recovered somewhat from its initial lows. The GBP’s movements are mostly in line with those of its major currency counterparts in what is otherwise nondescript trading. The final Q2 GDP, along with credit and money supply data, are scheduled to be released at the week’s end. The national accounts data are anticipated to validate a growth of +0.2% Q/Q, marking the most significant increase in output since the commencement of the previous year. However, a deceleration in growth to +0.1% is expected in Q3.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Last The S&amp;P 500 reached a three-month low yesterday, and the Conference Board's consumer confidence indicator dropped to its weakest point in four months. Additionally, new home sales plummeted to a level unseen in five years. It seems likely that the US federal government is on course for a partial shutdown on October 1. Nonetheless, the US dollar remains strong, continuing to gain against G10 currencies. Despite significant losses in the US yesterday, the equity market is experiencing a rebound today, with US index futures also demonstrating a more solid bias. The bond market is steadying today after recent sell-offs. The yield on the 10-year US Treasury note is down four basis points, hovering around 4.50%. Meanwhile, the US two-year yield, close to 5.20% last week, is approximately 5.05% now, with a 20-day moving average of ~5.02%. November WTI rallied from a dip to $88.20, settling near $90.40, and has reached up to $91.60 today, almost matching last week’s yearly high of just under $92.45.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">Even though the swaps market is leaning towards a Bank of Canada rate increase in Q4, the Canadian dollar can't keep up with the US dollar. The US dollar ascended to about CAD1.3525 yesterday and is probing the lower limits of the CAD1.3540-75 range, marking the next technical goal. The CAD1.3500 zone is now acting as a support level. Given the lack of significant data releases today the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> will be influenced by general market trends.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">Last The growing possibility of a partial US federal government shutdown has triggered a wave of long dollar position liquidations. It is depreciating against all G10 currencies and showing mixed performance against the currencies of emerging markets. The shutdown is projected to decrease GDP by 0.2% per week and will affect the timetable of data releases, including the upcoming week's jobs report. Moody's, the final major rating agency to assign a AAA rating to the US, has recognized that a government shutdown would adversely impact credit ratings.</p><p style="text-align:justify;">Concurrently, depleted US oil reserves have driven oil prices upward, with November WTI reaching $95 a barrel before retracting. US index futures are exhibiting slight variations. The bond market is experiencing a continued sell-off. European benchmark 10-year yields are 6-8 basis points higher, while Gilt yield has risen by 10 basis points. The yield on the 10-year US Treasury has increased by two basis points to 4.63%.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The combination of a weaker US dollar and elevated rates has kept gold close to its recent low, around $1872. The US dollar reached its peak against the Canadian dollar yesterday, nearly touching the 20-day moving average at CAD1.3545, before declining. Subsequent selling has brought the greenback to around CAD1.3480 today. Immediate support might be observed in the CAD1.3450-60 region. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p>The USD is trading lower as the weekend approaches, with considerable gains in Spot FX against it. This shift has been fueled by an improvement in the risk sentiment, leading to widespread gains in stocks and bonds. A correction in the dollar trend has been anticipated and has been overdue. Even though the current price movement indicates that this could be unfolding, the decline in USD might be merely indicative of transient end-of-month and end-of-quarter flows. A substantial downward move in the USD, in general, would most probably necessitate a significant shift in long-term rate differentials against the USD. Today's US data publications include figures on Personal Income and Spending, along with PCE data, expected to show an ongoing easing in core prices. The final September U. Michigan Sentiment data are due at 10ET; any significant deviation from the preliminary report in inflation expectations here could impact yields. Williams is scheduled to discuss monetary policy at 12.45ET. Aside from these data points, any unfolding developments regarding the US government shutdown could broadly affect markets; there might be an increase in yields (reflecting concerns about a downgrade) over the weekend if no resolution is reached. Currently, the DXY is barely maintaining an 11th consecutive weekly gain, albeit significantly below its peak. A weak close this week may imply a technical risk of further USD declines.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p>The CAD has managed to gain some ground, inching up to the lower 1.34 area against a generally weaker USD, with a 0.4% increase in the session, making it the underperformer among the major commodity currencies. It could potentially add further gains over the session. Canada is set to release its July GDP at 8.30ET, with the consensus predicting a 0.1% rise in output for the month—slightly more optimistic than the flat "flash" reading presented with the June report. &nbsp;Should the July GDP surpass expectations, coupled with a positive read from the August flash estimate, it would reinforce the idea of a resurgence in Canadian growth, following a mid-year stagnation. It’s worth noting that data disclosed yesterday revealed a 5.8% decline in Canadian job vacancies in July, hitting the lowest since May 2021. Robust data will heighten anticipations that the Bank of Canada (BoC) might still have more work to do. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p>The gain of the EUR above the 1.06 mark seems more indicative of positioning and short-term flows than a significant shift in market fundamentals. The EUR continues to be generally weak. While EZ/US 10Y spreads did show some narrowing previously, there has been a slight expansion again today. This occurs as core Eurozone bonds are exceeding expectations in performance, following the unveiling of the preliminary Eurozone CPI data for September, which came in lower than expected at +0.3%, compared to the anticipated +0.5%.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p>UK data presented varied results; the final Q2 GDP remained unchanged quarterly (+0.2%) but saw a slight upward adjustment yearly (to +0.6%, from +0.4%). This data notably revealed substantial upward revisions to business investment, which is a positive sign. However, Q2 witnessed a considerably wider-than-anticipated current account deficit, alongside indications of increased consumer borrowing demand and a deceleration in mortgage demand from the credit data. Adverse money supply data amplified concerns of a recession. Despite these mixed signals, Sterling has primarily overlooked the data, capitalizing on the weaker USD to return to the week’s opening levels.<br>&nbsp;</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD remains strong, though it is trading off its peak against major currencies. The bullish sentiment for the USD is bolstered by remarks from various Fed officials indicating a prolonged tight policy. Furthermore, Cleveland Fed President Mester hinted at a possible rate hike later this year. Meanwhile, Atlanta Fed President Bostic, a non-voter and known dove, is scheduled to speak at 8.00ET. US 10-year yields are stable, but attempts to push through the 4.70% mark have been stymied despite four tries in the last 24 hours. The swap market still signals concerns about a potential Fed hike, with December swaps indicating a 50% chance of an increase. Although the overarching upward trend of the USD seems heightened and possibly overstretched, the evolving market dynamics imply that the USD's climb might continue.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD slump since Friday has made it the most severe three-day downturn since last November. If we consider from Friday's USD lowest point, it stands as the steepest three-day drop for the CAD since the middle of 2022. Several factors have been unfavorable for the CAD lately, with the USD/Canada spreads broadening and a drop in crude oil prices. However, the movement seems somewhat overstated. Adjusted value, considering recent shifts in primary determinants, is approximately around 1.3550 as of this morning. For the exchange rate to stabilize, this week's Canadian data needs to indicate continued growth stability. Market expectations currently show a slight increase in the likelihood of an additional BoC rate hike by the year's end (14bps) compared to the Fed, with a projected 18bps tightening by January. If these probabilities decline, the CAD might face further depreciation, even though it already appears undervalued. Observe the <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;"><a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=USD&amp;from=EUR">EUR/USD</a> is trading off its overnight low, marking a fresh low in its downward trajectory, especially after a dramatic drop on Monday, ending the day at its lowest point. Statements from a Finnish ECB representative, speaking on behalf of Governor Rehn, resonated with the perspective of ECB President Lagarde. While Lagarde believes that the current rates, if sustained for a sufficient period, will impact inflation negatively, the Finnish representative mentioned that it doesn't necessarily rule out future rate hikes. Despite these comments, the EUR found it challenging to surpass the 1.05 mark. The market sentiment suggests that the peak for the ECB might have been reached.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Mann, a rate decision-maker at the BoE, gave expectedly hawkish remarks yesterday. He cautioned that due to stronger domestic demand and inflation, UK interest rates might have to be adjusted to more restrictive levels. After voicing his dissent last month, Mann is expected to maintain his hawkish perspective in the MPC for the upcoming period.</p>

<h3 style="margin-left:0px;">USD - US Dollar</h3><p style="text-align:justify;">The USD has seen a slight pullback this morning, influenced by fluctuations in the US 10Y bond yields which dropped from their overnight peak close to 4.89%. This decrease in yields has facilitated a minor uptick in global stocks, even as commodity prices largely remain subdued. The recent sharp increase in the DXY appears set for potential correction or stabilization. The rally boasts eleven straight weeks of gains, suggesting an unusual linear trend. This week, DXY's performance exhibits some technical vulnerability near significant retracement levels. The rising US long-term yields have bolstered the USD's broad advancements in past weeks. However, sudden shifts in US Treasury yields and the USD hint at potential instability; financial conditions appear to be constricting slightly, and the cost of offshore USD financing is on the rise, hinting at emerging liquidity challenges in the market. Policymakers are likely taking note. Fed's Mester hinted at this uncertainty yesterday, mentioning her doubts about the longevity of the spike in long-term yields. Meanwhile, Treasury Secretary Yellen expressed that prolonged high rates shouldn't be assumed. Upcoming data releases include the ADP jobs report, Services and Composite PMIs, Services ISM, and US Factory Orders. If these disappoint, the USD's recent surge might face pressure. Both Governor Bowman and Chicago Fed President Goolsbee will speak today, though their platforms might not necessarily focus on direct policy discussions.</p><h3 style="margin-left:0px;">CAD - Canadian Dollar</h3><p style="text-align:justify;">The CAD has stabilized near the 1.37 mark after subdued trading activities overnight. The likelihood of a BoC rate hike saw a slight increase yesterday, prompted by assertive remarks from BoC DG Vincent. He highlighted an "uncommon uncertainty" concerning the inflation projection in the midst of persistently high prices. Vincent also drew attention to the potential challenge of businesses continuously increasing prices, both in frequency and magnitude, which might hinder the achievement of stable, low inflation. The takeaway is that the BoC might need to implement more measures to control these prices. January swaps have gone up by 3-4bps since the end of last week, now reflecting a 21bps tightening anticipation. Strong employment data on Friday might solidify market expectations for another rate hike, potentially bolstering the CAD. Observe <a target="_blank"  href="https://www.mtfxgroup.com/tools/currency-charts/?to=CAD&amp;from=USD">USD/CAD</a> trends here.</p><h3 style="margin-left:0px;">EUR - Euro</h3><p style="text-align:justify;">The EUR experienced a boost during the European market's opening, thanks to value seekers, as US yields receded from their high points. Additionally, slight upward adjustments to September's Eurozone Composite and Services PMIs contributed to this positive momentum. ECB President Lagarde emphasized that the ECB will maintain its policy at a "sufficiently tight" stance as long as necessary to control inflation. ECB Governor Panetta, known for his dovish stance, is scheduled to speak at 10ET.</p><h3 style="margin-left:0px;">GBP - British Pound</h3><p style="text-align:justify;">Sterling hit a fresh cycle low, approaching 1.2040 during the initial hours of European trading. However, it rebounded by a cent throughout the European morning. The GBP benefited from the broader decline in the USD and positive adjustments to the UK's September Composite and Services PMIs. BoE Governor Bailey mentioned the ongoing challenge of tackling inflation, noting that the task "is not done". Despite this, expectations regarding BoE's tightening remain relatively stable.&nbsp;</p>

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