USD

The US Dollar is tumbling this morning, falling off from the March high seen on Friday as both the BOJ and PBOC helped boost their respective currencies at the expense of the Greenback. 

With no US data of substance on the calendar for the next two days, traders will take the opportunity to reposition themselves ahead of Wednesday's highly anticipated US CPI report, which could significantly impact the Fed's approach for the rest of 2023. 

As it stands, market pricing points to the Fed holding rates steady at their upcoming September meeting, while the odds of a November hike are essentially a coin flip.

EUR

The Euro is in the green this morning, primarily due to a weaker Dollar, as EUR/USD looks to snap an eight-week losing skid.  

According to the European Commission's Summer 2023 Economic Forecast, Eurozone GDP is expected to be 0.8% for 2023, revised down from the previous projection of 1.1%, due to persistent inflation and higher interest rates. Growth is also expected to remain weak in 2024, with GDP projected at 1.3%, while inflation is anticipated to be 5.6% in 2023 and 2.9% in 2024, partially influenced by rising oil prices.

Elsewhere, Italy's industrial production dropped by 0.7%, with declines in intermediate goods, capital goods, and consumer goods. However, energy production increased by 3.7%.

GBP

The British Pound is rallying today and looking for its first winning day in a week thanks to a pullback in the US Dollar this morning.

Looking ahead, GBP traders will get a fresh look at the UK labor market tomorrow. The three-month unemployment rate is projected to slightly tick up to 4.3% in July from the 4.2% seen in June, marking the fourth consecutive month of rising unemployment. In addition, the UK is expected to have lost 185K jobs in July, which would be the most significant monthly decline since September 2020.

On the other hand, average earnings, both with and without bonuses, are expected to match their previous reads at 8.2% and 7.8%, respectively.

JPY

After initially surging over 1% overnight, the Japanese Yen has pulled back slightly, although still up over 0.9% against the Greenback heading into the North American session.  

Today's rally in the Yen comes as markets react to the latest comments by BOJ Governor Kazuo Ueda that the Central Bank should have enough inflation data by the end of 2023 to judge if it can end its negative rates policy. Ueda's comments echo those of other BOJ members as of late, pointing to a slow but steady shift to a more hawkish stance from the BOJ after years of perpetually accommodative monetary policy.  

CAD

The Loonie is up 0.4% this morning, building on Friday's post-employment data rally that boosted odds for another BOC rate hike by year's end to 44%. 

With the Canadian calendar devoid of headline-grabbing data this week, CAD traders will focus heavily on this week's US inflation, retail sales, and consumer sentiment data to guide their next moves. Oil prices will also play their part in the equation, with black gold continuing to hold at its highest level since November 2022 as Saudi Arabia and Russia keep a tight grip on supply to boost prices.

MXN

The Mexican Peso is inching higher today and still looking for its first winning day of September after a dismal stretch that has seen the currency plummet to its lowest level since June.

Earlier today, Mexico's industrial production for July came in at 0.5%, the fourth consecutive month of growth. Still, the pace has also been slowing since May. On an annual basis, production increased by 4.8%, a significant increase from June's 3.8% read.  

Mexico's calendar is set to go quiet until next week, leaving the Peso at the whims of the US Dollar and broad market sentiment until then.

BRL

The Brazilian Real is rallying this morning and pacing for its best daily performance since August 23, driven by improved market sentiment and risk appetite. Despite today's move, BRL has more work to do to recoup its losses of over 2% incurred over the last couple of weeks.

Tomorrow, at 8:00 AM EST, Brazil's latest consumer inflation data will be released. Market forecasts point to a rebound in annual inflation to 4.67% in August, the highest since February, following a 3.99% read in July. Meanwhile, monthly inflation is expected to rise 0.28%, the highest since April.

CNY

The Chinese Yuan is surging this morning, up over 0.7% in the offshore market and on track for its best day since July after the PBOC set its onshore fix 1289 pips above the Reuters estimate – its largest gap ever. This move, combined with news that the PBOC will scrutinize all bulk US Dollar purchases, indicates the Central Bank's increasing discomfort with the Yuan's freefall.

Meanwhile, on the data front, Chinese banks extended CNY 1.36T in new yuan loans in August, a significant rise from July's CNY 0.35T, exceeding market expectations, driven by a renewed focus on stimulating growth.

In addition, China's vehicle sales rebounded by 8.4% year-on-year in August, boosted by a 27% jump in eco-friendly and electric cars.