Daily Currency Update

USD - US Dollar

The DXY is slightly down today, indicating a pause in its strong gains from the recent CPI and PPI data as investors await the upcoming FOMC decision. Despite a firmer USD this week, its rise appears more consolidative following previous declines. Overall, the week hasn't significantly altered USD's outlook. Fed expectations have slightly adjusted, with markets now anticipating roughly 75bps of easing by December, a slight decrease from last week. Although no rate change is expected next week, the market will focus on any shifts in the rate outlook and policymakers' views.

CAD - Canadian Dollar

The increase in USD/CAD following yesterday's US PPI data may further emphasize the short-term trading range of USD/CAD. The pair surged from around 1.3460 to just below 1.3550 overnight, maintaining its position near the CAD's fair value equilibrium (1.3541 today). Canada is set to announce Housing Starts and Wholesale Sales data, with Wholesale figures anticipated to decline by 0.6% in January, consistent with Statcan's preliminary estimate.

EUR - Euro

EUR/USD modestly recovered from overnight lows to approach the 1.09 level, recouping around a third of its previous day's losses. While bargain hunters showed interest near 1.0875, lacking data or market news limited any significant EUR rise. ECB remarks, including Vujcic's caution on rates pending wage data and Rehn's optimism for lower rates with easing inflation, offered no fresh insights.

GBP - British Pound

Sterling remains mostly stable today. The Bank of England's 12-month inflation expectations survey fell to 3.0% last month, marking the lowest point since late 2021, which is a positive sign for policymakers. Prime Minister Sunak downplayed the chances of a May election, yet the gloomy sentiment among Conservative MPs, due to very poor polling results, implies that political rumors will continue to influence UK markets for the time being.