Daily Currency Update

USD - US Dollar

The USD has weakened as the week ends, with lower US yields and a general softness. Bond yields are down globally, stocks vary—Asia is weaker, Europe stronger, and US futures slightly soft. Crude oil and industrial metals are both mixed. The DXY struggled above 103.50, indicating potential further USD losses. Since Tuesday, the dollar experienced alternating gains and losses, with the DXY moving sideways. Despite a strong GDP report, the USD didn’t capitalize fully, possibly due to investor caution ahead of upcoming data. December's expected figures include a 0.3% rise in US Personal Income and a 0.5% increase in Spending. The core PCE deflator is anticipated to decrease to 3.0% year-over-year from November's 3.2%. Recent months show a slowdown in core PCE trends, though there was a slight increase in November. Slower inflation signs might influence market expectations of potential Fed rate cuts soon.

CAD - Canadian Dollar

The CAD is marginally risen to as we start today's session, despite mixed commodity and stock markets. The gains seem weak but are likely supported by narrowing US/Canada yield spreads in the 5-year and 10-year bonds, reaching October's narrowest levels recently. This compression has been significant in recent weeks. The USD/CAD's fair value today is 1.3471, indicating the CAD is currently valued appropriately. 

EUR - Euro

The ECB's policy decision matched expectations, but markets interpreted its emphasis on "data dependency" as a signal to increase bets on an early rate cut, despite President Lagarde suggesting a summer cut is likely. It's uncertain if the ECB will confirm that inflation risks have peaked by April, making a June rate cut more probable. The EUR dipped to the low 1.08s but recovered in European trade to mid-week levels. Comments from ECB hawks against early cuts might have aided the EUR's rise.

GBP - British Pound

The Gfk Consumer Confidence index rose to -19 in January, surpassing forecasts and hitting a two-year high. Improved outlook and personal finance measures, driven by expectations of eased BoE policy tightening, contributed to this rise. Sterling has mildly increased, stabilizing after a dip below 1.27.