An above-forecast first reading of Q2 US GDP and strong consumer spending data yesterday calmed equity markets, while the Q2 core PCE price index rose 2.9% compared to expectations of 2.7%.

The USD traded mixed, fluctuating between gains and losses in the North American session before closing marginally higher. Yesterday's elevated core PCE data suggested that today's monthly and yearly core PCE readings could be higher than anticipated, although the results were at-forecast for the month (0.2%) and slightly higher year-over-year (2.6%) than expected (2.5%).

The growth and price level data over the past two days has done little to alter expectations for the Fed, with the September decision still fully priced for the first rate cut. The next Fed rate decision is on Wednesday, July 31st. The USD is trading slightly softer today.

EUR/USD closed marginally higher yesterday after peaking with a gain of 0.25% in the afternoon. The EUR is up 0.1% today, trading about 0.2% lower than this time last week. Speaking on the sidelines of a gathering of G20 finance chiefs yesterday, ECB's Nagel reiterated the official ECB stance that policy will be decided on a meeting-by-meeting basis, cautioning against any pre-commitments. "You just have to be patient and, above all, keep your monetary policy in restrictive territory until inflation has reached a stable level of 2%," Nagel said. Key data is released next week, including the first reading of Q2 GDP (Tuesday), CPI (Wednesday), and the unemployment rate (Thursday).

GBP/USD fell 0.45% yesterday and is marginally higher this morning, trading roughly 0.5% lower than this time last week. Market expectations of policy easing by the BOE for the remaining 2024 decisions have grown this week, with next week's decision (Thursday, August 1st) having a 46% probability of a rate cut priced in. Over one-and-a-half 25-basis point cuts are priced into the November 7th BOE rate decision.

USD/CAD rose 0.15% yesterday, marking its seventh consecutive daily advance. The pair is trading in a tight range and is marginally lower today, but still nearly 0.7% higher than this time last week. An employer survey of payrolls in May released yesterday showed 41,000 hires, with average hourly earnings increasing by 4.1%. A new survey by the Canadian Federation of Independent Business found that 13% of Canadian small businesses plan to increase their headcount over the next three or four months, the lowest level since January 2021. Implied swap odds for another rate cut at the September 4th BOC rate decision are nearly 75%. May growth data is released on Wednesday.