Daily Currency Update

USD - US Dollar

The USD is continuing its recovery going into the weekend. This week, the USD has gained ground against major currencies, pushing the DXY to the 101 level, with these gains being broadly spread across most major currencies. Stock markets are showing mixed to slightly stronger performance, with Asian markets being a bit weaker, but European equities and US futures exhibiting strength. US Treasuries have seen little change, while Gilts are slightly underperforming due to UK data. The USD's rebound this week offers some relief from recent losses and could be attributed to investors positioning themselves ahead of next week's FOMC decision on Wednesday and ECB announcement on Thursday. Although this week's rebound has halted the sell-off, it has not yet signaled a definitive reversal in the recent soft USD trend. Despite the recovery, many analysts still believe that the upside potential for the USD remains limited. There are no US data reports scheduled for today.

CAD - Canadian Dollar

The CAD is showing minimal movement during this session and stands out as a stronger performer compared to other major currencies. The CAD's performance seems to be closely tied to the overall trend of the USD, but currently, there is noticeable selling interest around the 1.32 level. Forecasts anticipate a 0.5% increase in Canadian Retail Sales for May, aligning with the flash estimate from the robust April report released last month. If the data confirms this positive outlook, it could provide a slight boost to the CAD in today's trading session. Observe the USD/CAD trends.

EUR - Euro

EUR/USD remains near yesterday's low following a marginal uptick during the subdued overnight trading. The upcoming ECB policy decision in the following week is widely anticipated to result in a 25bps hike. However, there is less certainty among market participants regarding a potential further increase in September, as reflected in swaps with only about a 50% probability of a hike. The key factor influencing the EUR's response will be the messaging regarding the interest rate outlook after the ECB's decision next week.

GBP - British Pound

This morning, Sterling received a boost from stronger-than-anticipated UK Retail Sales, which recorded a +0.7% month-on-month growth compared to the forecasted +0.2%. Additionally, data indicated that UK government finances improved, with borrowing showing a decline in May and June. However, the positive developments halted there as the government suffered losses in two out of three by-elections held yesterday. While the Bank of England's pricing for the August 3rd decision has slightly eased, markets still factor in the possibility that policymakers might implement a hike of more than 25bps, with 36bps currently priced in.