Daily Currency Update

USD - US Dollar

While the US January data began poorly with a weak Empire Manufacturing Survey, the USD remained stable, supported by high US yields and Fed’s Waller's remarks. The USD is stronger today but off its highs against major currencies. Global stocks are down due to concerns over the Chinese economy and fading hopes for rapid Fed rate cuts. Chinese Q4 GDP was 5.2%, and Retail Sales missed forecasts. This, along with firm US yields, will support the USD short-term and fuel its early year rebound. Today's busy schedule includes US Retail Sales, Import Prices, Industrial Production, Business Inventories, NAHB Housing Index, and the Beige Book release.

CAD - Canadian Dollar

The CAD remains weak on low risk appetite, reflecting broader USD strength after Canadian core CPI data reduced BoC rate cut expectations. Today's weak stocks, a higher VIX, and lower crude prices are further pressuring the CAD, keeping it near fair value estimates (1.3537). This doesn't rule out potential near-term USD gains, especially if the market continues to adjust March Fed rate expectations. Seasonal trends and technical factors also support a stronger USD. Today's releases include International Securities Transactions data and IPPI at 8.30ET. Observe USD/CAD trends.

EUR - Euro

Davos is in full swing, with upcoming remarks from Knot, Lagarde, and Nagel today. ECB officials are guiding market anticipations, shifting the expectation of a rate cut from spring to summer. President Lagarde emphasized this point in her recent statement, suggesting a summer rate cut is feasible but highlighting that the central bank's decisions are contingent on economic data.

GBP - British Pound

Sterling, which has been trading at the at the lower end of its range at 1.26, surged nearly a cent after UK CPI for December reported a 0.4% monthly increase, twice the expected rate. Annual inflation rose to 4.0%, higher than November's 3.9% and the anticipated 3.8%. This led to reduced BoE rate cut expectations, especially with BoE officials indicating January CPI could rise due to increased energy bills.