The USD snapped a two-day losing streak yesterday, advancing nearly 0.3% as investors pared back expectations of aggressive Fed interest rate hikes. Stocks rebounded on renewed dip-buying, and US Treasuries fell as demand for haven assets waned. US trade balance data showed the deficit narrowed in June for the first time in three months, capping a second quarter where goods and services trade had the largest negative impact on GDP since early 2022. Presidential candidate Kamala Harris announced her VP pick, selecting Minnesota Governor Tim Walz as her running mate.

Trading mixed overnight, the USD enters the North American session about 0.1% higher. USD/JPY rose over 2% at overnight highs after BOJ Deputy Governor Uchida pledged that the bank will refrain from raising rates during market instability. The move in the yen—a favored funding currency for carry trades—has led to higher-yielding currencies like MXN and ZAR strengthening. USD/MXN fell for the first time in four days, entering the North American session down 1.5% after being down as much as 1.9% overnight.

EUR/USD closed 0.2% lower yesterday and is down about 0.1% today, trading roughly 0.7% higher than this time last week. Eurozone aggregate retail sales data missed expectations yesterday, the lone remaining data print this week. After German factory orders data significantly beat expectations yesterday, today’s industrial production also rose more than expected, driven by cars and electrical equipment. A separate report saw German exports fall 3.4% month-over-month in June. The ECB’s Rehn endorsed the bank's rate cuts if confidence in the downward inflation trend remains, while admitting the path to the 2% inflation target remains bumpy.

GBP/USD fell 0.65% yesterday and is about 0.2% higher today, trading about 1% lower than this time last week. A fairly light data week has seen services, construction, and composite PMI readings all beat their respective estimates. Implied swap odds remain steady at just under 50% that the BOE will cut rates again at the September 19th rate decision.

USD/CAD closed 0.3% lower yesterday and is down another 0.3% today, headed for its fourth straight daily decline as improving risk sentiment and crude oil prices support the CAD. Yesterday, Canada reported an unexpected surplus in June after three straight monthly deficits, as exports (+5.5%) outpaced imports (+1.9%). Exports were driven higher by expanded crude capacity and demand for gold. Key employment data comes Friday with median forecasts of +25.0k job adds and an unemployment rate ticking up 0.1% to 6.5%.