Daily Market Pulse

EUR/USD

Spot has retraced 0.9% from yesterday’s highs and is down 0.45% on the day. There has been no significant news other than the general sell-off in risk continuing after last week’s strong employment numbers in the US. Across markets, all eyes are on next week’s US CPI release to indicate what Fed policy may look like in the near term.

USD/CAD

Spot is 0.5% lower on the day, near yesterday’s lows, as the Net Change in Employment release showed at +150k job gain in January versus +15k expectations. This gain comes in line with last week’s huge beat in Non-Farm Payrolls in the US and will certainly test the Bank of Canada, given their recent decision to pause rate hikes. While it is unlikely that a single data point will encourage a resumption of hikes if the next CPI reading implies an uptick in inflation, the combination of the two may be hard for the BoC to ignore.

GBP/USD

Spot has been in a 0.5% range overnight but currently remains almost unchanged. Quarterly GDP came in at 0%, as expected, and yearly at 0.4%, also expected. The prior yearly reading was +1.9%, so this is somewhat of an encouraging sign that the Bank of England may slow their hiking pace sooner than later, especially as their trade deficit with the European Union increases and domestic labor union strikes continue. 

USD/BRL

While spot opened higher at levels not seen since early January, it has moved 0.5% lower on the day, the first sign of relief over the last several days. The primary market drivers have been the ongoing feud between President Lula da Silva and the Central Bank. There is a discussion about a potential re-evaluation of official inflation targets (read: to be adjusted higher)  by the National Monetary Council, but these conversations are typically held in June. It is in the interest of market stability for this issue to be put to bed as soon as possible, as uncertainty in such matters does not historically bode well for the BRL.

USD/MXN

The Central Bank of Mexico (Banxico) surprised the market yesterday with a 50bp rate hike, 25bps more than expected. Spot subsequently dropped 1% and is another 0.35% lower from yesterday's close. The BoC’s decision to pause and the Fed slowing down makes Banxico quite the North American outlier. The CPI reading earlier in the day was slightly worse than expected, and as such, as part of their statement, they have mentioned that “balance of risks for CPI trajectory biased to the upside.” They countered this hawkishness, indicating that they may slow down the pace of hikes to 25bps at the next meeting.