Daily Market Pulse
US CPI Data Surprises, USD Weakens as Market Awaits Key Rate Decisions
2 minute readYesterday’s US CPI data came in below forecast, with the headline reading receding by 0.1% in June, contrary to expectations of a 0.1% gain. The core monthly measure printed at 0.1%, versus a forecast of 0.2%. Year-over-year CPI at 3.0% is the lowest since June of last year. US 10-year Treasury yields traded at their lowest levels since the middle of March and now sit at 4.2%—nearly 30 basis points lower than at the start of July. Implied fed funds swap odds for a rate cut at the September decision moved from just under 80% to fully priced as a result.
After falling nearly 0.5% yesterday following the CPI data, the USD has continued another 0.2% lower today despite PPI data printing above expectations. The University of Michigan’s preliminary consumer sentiment index for July is released at 10 AM.
EUR/USD rose nearly 0.4% yesterday and is headed for its third straight daily advance, trading 0.2% higher today. The pair is approximately 0.65% higher than this time last week. A light data slate this week paves the way for aggregate eurozone CPI data on Monday ahead of the ECB rate decision on Thursday. Implied swap odds indicate less than a 5% chance of a policy easing move. Odds of a rate cut at the ECB’s September meeting are nearly 90%.
GBP/USD gained 0.5% yesterday and is up another 0.4% today, trading about 1.4% higher than this time last week. The pair traded at YTD highs yesterday, posting fresh YTD highs today. The last time we were at these levels was the end of July 2023. The August 1st BOE rate decision has seen implied odds of a rate cut decline from nearly 2/3 at the start of the week to just over 50% currently. Key CPI and labor market data come next week.
USD/CAD rose 0.1% yesterday and is essentially flat today, trading marginally lower than this time last week. The pair is set to close lower for a 5th straight week. BOC outlook surveys, CPI, and retail and manufacturing sales highlight next week’s domestic data prints. Implied rate cut odds for the BOC’s July 24th rate decision are currently at 75%, up from 50% at the start of the month.
