Daily Currency Update

USD - US Dollar

The USD is marginally lower today, as the New Year rally pauses with the EUR gaining slightly from supportive European data. The broader USD dip may just be a temporary break in its recent recovery. FOMC minutes showed unexpected hawkish tones, hinting at sustained high rates. Despite progress in inflation, indicated by 6-month PCE figures, a Q1 rate cut is still possible, with market odds for a March cut at 75% for a 25bps reduction. Yesterday's softer JOLTS data restrained the USD's rise, serving as a caution before today's and tomorrow's job data releases, including ADP jobs at 8.15ET (expected +121k) and weekly claims at 8.30ET, with continuing claims rising since September, pointing to a weakening labor market.

CAD - Canadian Dollar

Strengthening stocks and rising crude oil prices, up 1% due to halted Libyan production and Middle East tensions, are slightly boosting the CAD, despite the overall decline of the USD today. The USD/CAD is experiencing support around the low 1.33 range, a critical short-term area due to its technical importance. The estimated fair value of USDCAD has decreased slightly from yesterday, settling at 1.3478 today. Observe USD/CAD trends.

EUR - Euro

This morning, Eurozone data showed significant revisions to German and French Services and Composite PMI figures for December, raising the Eurozone Services index to 48.8 (from 48.1) and the Composite to 47.6 (from 47). German regional inflation data indicate the national December CPI report might show an increase from November's 3.2% Y/Y. While the EUR's gains are slowing in the mid/upper 1.09s today, these modest improvements are still viewed negatively in the broader context, following the currency's decline from over 1.11 during New Year.

GBP - British Pound

The UK's final Services and Composite PMIs for December were adjusted upwards to 53.4 and 52.1, respectively, from initial estimates of 52.7 and 51.7. Additionally, November's Consumer Credit demand was stronger than anticipated, reaching GBP 2.0 billion. However, the BoE Decision Maker Panel's one-year inflation expectations fell to 4.0% from 4.4%. Sterling's rise is due to these stronger data reports and the general weakening of the USD in this session, but the potential for further strengthening seems limited, considering the recent trend reversal in the USD since the year's end.