Daily Currency Update

USD - US Dollar

The USD has faced challenges following two successive days of disappointing US statistics. This has led many FX traders to believe that the Federal Reserve's tightening phase may have peaked, with the next step possibly being a rate cut, perhaps as early as Q224. The anticipated FX support from end-of-month rebalancing at the close of August hasn't materialized as expected. Today, attention will shift to the July PCE deflator data, the latest jobless claims data, and speeches from the Fed’s Susan Collins and Rafael Bostic. Before the release of the PCE data, general market predictions indicate a resurgence in both the main and overall yearly inflation rates. The unemployment claims might further emphasize the US labor market's robustness. Regarding the FX market's response, it will likely hinge on how the new data matches predictions. Signs of persistent inflation or an enhanced labor market could boost US rates & yields, stabilizing the USD. On the other hand, additional economic setbacks could further weigh down the USD.

CAD - Canadian Dollar 

After peaking around CAD1.3640 last week and holding steady on Tuesday, the US dollar dipped to CAD1.3515 yesterday. A descent past the CAD1.3495-CAD1.3500 range might indicate a push towards the 1.3450-60 zone. Fundamentally, while Canada's current account usually isn't a focal point, the deficit seems poised to double from Q2 to Q3. This could hint at a softer Q2 GDP, to be announced on Friday. The US dollar could face initial resistance around CAD1.3565-75 today. Observe the USD/CAD trends.

EUR - Euro 

In August, the EUR stood strong against the rising USD among the G10 FX. This strength is largely attributed to the market's expectations of another ECB rate hike by year's end, reflecting the Eurozone's continued inflation pressures. The main focus today is on the Eurozone's preliminary HICP inflation for August. Market analysts expect the headline inflation to stay around 5.3% YoY, while core inflation might drop to 5.3% YoY. Focus will also be on remarks by ECB’s Isabel Schnabel and Luis de Guindos, and the July ECB policy meeting report. If the data suggests a hawkish tilt in September, the EUR might benefit.

GBP - British Pound

The pound closed above its 20-day moving average (around $1.2700) for the first time this month, touching close to $1.2750 amid a widespread dollar decline following weak data. After surpassing the $1.27 mark, it maintained that level, though it seems to have a downward trend today. During the European morning, it hit session lows near $1.2675. Support is anticipated between $1.2630-50.