Daily Currency Update

USD - US Dollar

The USD is showing signs of recovery after a slight dip, with most major currencies falling against it today. The DXY index indicates potential strength, possibly preparing for a retest of early week highs. With minimal market risks in the US today, the focus is on potential further lift for the USD ahead of tomorrow's annual CPI revisions, which have previously caused significant market reactions.

CAD - Canadian Dollar

The CAD has slightly weakened against a stronger USD, influenced by mixed market signals and minor gains in crude oil amid Middle East tensions. The CAD's movement reflects the overall USD trend and aligns closely with its short-term fundamental equilibrium. The Bank of Canada's latest policy summary echoed previous statements, indicating no new developments. Policymakers believe current rates are sufficient to slow the economy and reduce inflation, yet concerns remain over persistent shelter costs and wage growth keeping inflation high. This ongoing uncertainty suggests genuine worry about lasting inflation rather than a strategy to deter premature rate cut expectations. Observe USD/CAD trends.

EUR - Euro

EUR/USD approached 1.0790 overnight but has since declined. The ECB's Economic Bulletin noted stagnant growth in Q4 2023 and some inflation progress, but highlighted potential inflation risks from unexpectedly high wages. Policymakers are likely to be cautious about rate cuts until more is known about early-year wage negotiations, possibly delaying any easing decisions until June.

GBP - British Pound

Sterling has returned to the key 1.26 level, holding steady after an initial test. The January RICS House Price Balance showed improvement, indicating a positive shift in the UK housing market with increased buyer interest and expectations for future sales. This suggests a rebound in housing activity, fueled by anticipation of upcoming BoE easing.