Daily Currency Update

USD - US Dollar

The major currencies are seeing a decline in the value of the US dollar, reversing gains made yesterday. The decrease in the USD is driven by market positioning in anticipation of the release of US CPI data at 8:30 am ET. It is expected that inflation will show a slight decrease in headline prices in May, with a respectable 0.2% increase for the month and a 4.1% increase compared to the previous year (down from 4.9% in April). The USD is expected to decline further due to soft inflation data, as market participants carefully evaluate every piece of information that could influence the Federal Reserve's decision-making process ahead of tomorrow's announcement. Market sentiment has been leaning towards the idea of a more cautious approach from the Fed, so significant selling of the USD is unlikely to occur at this time.

CAD - Canadian Dollar

The Canadian dollar (CAD) has shown a slight increase in strength against the US dollar (USD) today but remains within a familiar trading range above 1.33. There has been a modest rebound in crude oil prices following yesterday's losses, and overall commodity prices are also showing some improvement. This is partly due to expectations of increased stimulus measures in China. Global stocks are generally experiencing gains as well. The positive market sentiment suggests that the USD/CAD pair may attempt to reach the lower end of the 1.33 range this morning, provided that the US data reports align with market expectations. However, after the USD saw its first net gain in nine sessions yesterday, there may be some pressure for further consolidation in the USD/CAD pair unless there are clear indications of additional gains for the CAD in the near future.

EUR - Euro

The EUR/USD pair is once again approaching the 1.08 level, indicating a generally weaker US dollar. The June ZEW survey in Germany has shown a mixed sentiment among investors. The Expectations component of the survey improved to -8.5 (from -10.7), surpassing expectations of a decline to -13.5. However, the Current Situation index experienced a significant decline, dropping to -56.5 from -34.8. This decline in the index may be attributed to recent data indicating that Germany entered a mild recession at the beginning of the year.

GBP - British Pound

The British pound (GBP) has regained strength, surpassing the upper 1.25 range, following the release of UK employment data that exceeded expectations. The data revealed a lower unemployment rate, job gains that were stronger than anticipated, and weekly earnings that exceeded forecasts. As a result, the June 22 Bank of England (BoE) swaps indicate an implied tightening of 31 basis points (bps), slightly higher than the 28 bps observed yesterday.