The USD snapped its four-day losing streak yesterday after retail sales data exceeded expectations, rising 0.2%. As investors anticipated today's 2 PM Fed rate decision, equities remained near record highs and US 10-year Treasuries gained 3 basis points. Fed funds swap odds implied a just over 50% probability of a 50 basis-point rate cut from the Fed.

USD losses peaked before today's North American session, reaching -0.25%, but subsequently recovered roughly half of that decline. Implied swap odds have shifted slightly in favor of a 50 basis-point Fed cut today, now at around 55% likelihood. Today's 2 PM Fed rate decision includes an updated dot plot and a subsequent press conference by Chair Powell. The Fed's messaging regarding the size of the rate cut will be particularly crucial for shaping future rate path expectations.

EUR/USD fell 0.15% yesterday but is 0.2% higher today, trading about 1.1% higher than last week. Monthly CPI data came in below expectations today (0.1% versus 0.2% forecast), while the yearly reading met the median forecast of 2.2%. Investor sentiment data for both the eurozone and Germany missed expectations significantly yesterday. The economic calendar is relatively light for the rest of the week.

GBP/USD fell 0.4% yesterday but is 0.6% higher today, trading approximately 1.5% higher than last week. Today's August CPI readings aligned with median forecasts across services, core, and headline measures. The BOE rate decision is tomorrow at 7 AM and carries only a 16% probability of a cut. The November decision date remains fully priced for a 25 basis-point easing move.

USD/CAD rose 0.1% yesterday but is 0.1% lower today, trading about 0.1% lower than last week. The Canadian Dollar remains an underperformer in the G10 space due to continued weakness in commodities. Yesterday's data showed that inflation is returning to the BOC's 2% target (for the first time since early 2021). Core inflation measures also continued to ease. Near-term cut odds rose modestly, and three 25 basis-point cuts are now fully priced in for the remainder of 2024.