The USD is higher this morning against a basket of currencies, even as Treasury yields retrace, and equities partially recover from recent losses. Oil and gold are slightly lower on the day, while Bitcoin moved as much as 12% to the upside on continued speculation that the SEC will approve multiple Bitcoin ETFs in the near future.

Two well-known fund managers signaled yesterday that the rout in US Treasuries may be over, triggering a retracement, with the 10-year yield moving as low as 4.8% from the recent 5.0%+ high. Nonetheless, the effect on the USD has been minor, and the correlation breakdown with prevailing interest rates shows no signs of reversing. These dislocations may be due to the variety of themes currently circulating, including geopolitical developments in Gaza, the US economic outlook, and the growth slowdown in China, where another slew of measures to bolster the economy was just announced.

The Chinese legislature approved a plan to issue additional sovereign debt as well as raise the official budget deficit limit. President Xi even paid a symbolic visit to the central bank, a rather unusual move. These actions come on the heels of continued economic concerns, primarily stemming from the domestic property market. The Chinese economy is a major driver of global growth, and a further deterioration of conditions may have far-reaching effects.

In addition to earnings releases from Microsoft and Alphabet this afternoon, the market will be processing a slew of US economic data for the remainder of the week, including New Home Sales, GDP, Initial Jobless Claims, and PCE.

EUR/USD is lower on the day, as German and French PMIs mostly showed slowdowns in activity. As the ECB seems increasingly more concerned with growth versus the fight against inflation, hawkish expectations for the next rate decision on Thursday are fleeting, bringing the Euro lower with them.

USD/CAD is higher on the day in line with USD peers, as the market awaits tomorrow's Bank of Canada rate decision. A pause is expected given recent signs of inflation slowdown, even as the most recent employment figures were stronger than anticipated.

GBP/USD is lower on the day on mixed economic data. While most of the PMI data released today showed some improvement, employment figures also showed that jobs are being shed at the highest rate since early 2021. Stagflation is the primary concern for the UK at the moment, with the prevailing rate of inflation running hotter than most European peers.

USD/MXN is slightly higher on the day, as mixed data in today’s CPI release will likely do little to change Banxico’s monetary policy. While both the bi-weekly and YoY headline readings came in lower than expected, their respective core measures were slightly higher than expected.

USD/BRL is slightly lower on the day, continuing its recent trend of stability amongst its peers. The primary market drivers are political in nature at the moment, with a tax reform bill making its way through the senate and central bank presidential nominations on the cusp of release.