Daily Currency Update

USD - US Dollar

Yesterday's U.S. data, despite a slight Q3 GDP revision, added pressure on U.S. rates and the USD. Markets focused on the revised core PCE and weak inventory data, hinting at Q4's slower growth. The Beige Book confirmed this slowdown. However, the USD still held steady, its recent drop seeming excessive. It has regained some ground today, influenced by higher U.S. Treasury yields and weaker Eurozone data. Yet, a major USD recovery is unlikely, as broader trends are bearish and December is usually weak for the USD (average -0.9% return over the past 25 years). Today's data is expected to show a softer labor market, reduced spending, and weaker core inflation.

CAD - Canadian Dollar

The CAD is slightly weaker in today's session, but it's holding up better against the USD rebound than many others. Stock markets are mostly stronger, and crude oil prices have increased following reports that OPEC+ may have agreed on production cuts. Canada is awaiting its GDP update this morning. September's industry-level output is anticipated to be unchanged. The Q3 GDP is expected to show a modest increase of 0.1%, following a 0.2% decline in Q2. Weak data won't be favorable for the CAD, but the focus is mainly on the US data releases at 8:30 ET. The impact on the CAD might be neutral, especially with tomorrow's job data on the horizon. Observe USD/CAD trends.

EUR - Euro

EUR losses have intensified during the European session due to a series of weak data reports, including Spanish and French GDP, German employment figures, and a lower-than-expected Eurozone CPI for November. The preliminary inflation data indicates a monthly decrease of 0.5% and a yearly rate reduction to 2.4%. The core inflation rate also slowed to 3.6%, down from 4.2%. While the spread between EZ/US 2-year yields has slightly widened, the market's anticipation of a 25bps ECB rate cut by April seems early. Core inflation is still high, and headline inflation might increase in the coming months. It's likely that policymakers will resist the notion of early rate reductions.

GBP - British Pound

Sterling is weaker today, following the overall downtrend among major currencies. According to the BoE/Decision Maker Panel survey, UK firms anticipate a 4.4% price increase over the next year, slightly down from the 4.6% forecast in the October survey. MPC member Greene is scheduled to speak at 11 ET.