Daily Currency Update

USD - US Dollar

Markets are in a holding pattern waiting for the release of the FOMC minutes later today. The US dollar is showing mixed results against other major currencies, despite uneven trading in stock markets. While most major bond markets are showing little change to a slight decline, US Treasurys are seeing better performance. The dollar is slightly stronger against key European currencies, providing a modest boost to the DXY index. The dollar's valuation, based on yields, appears to be pushing its limits, with limited room for growth without fresh market catalysts. Recent positive surprises in US economic data have raised expectations, yet the upcoming FOMC minutes are anticipated to suggest that while rate cuts may be on the horizon, policymakers are waiting for clearer signs of inflation moving towards their target before adjusting policy.

CAD - Canadian Dollar

The CAD is slightly weaker in today's trading. Yesterday's Canadian CPI data, which came in below expectations, initially drove the CAD down, but the losses stabilized around the low 1.35 range, reflecting both the data's impact and the general trend of the USD. The lower inflation figure is tentatively positive, but it's just a single report; substantial evidence of a consistent price decrease is necessary before the Bank of Canada considers rate cuts. While core inflation showed some reduction, its slow progress indicates that more data is required for the BoC to be confident that inflation is under control. Meanwhile, the USD faced significant resistance around the low 1.35s, consistent with recent patterns where its excursions above 1.35 have lacked durability. Observe USD/CAD trends.

EUR - Euro

This morning, the spot rate dipped slightly below 1.08, pausing— for now— the Euro's longest sequence of daily gains (five) since an eight-day run in July. Although there aren't significant fundamental factors boosting the Euro, some background positives like strong performances in European stock markets and more favorable yield differentials are lending support to the Euro. The current estimated fair value for the spot rate is 1.0803, which aligns closely with today's trading levels.

GBP - British Pound

The UK received a welcome boost from the latest borrowing data, showing a monthly budget surplus of GBP 23.3 billion, which was higher than anticipated. This result theoretically provides the Chancellor with additional flexibility for the upcoming budget announcement in two weeks, potentially allowing for tax incentives aimed at voters before this year's election. Meanwhile, the Sterling remains unaffected by this news, with a slight decrease in its value against the dollar and European currencies. Bank of England's Dhingra, known for his dovish stance, is scheduled to speak at 9:00 ET.