USD

Ongoing dollar weakness has continued without disruption throughout this week. The dollar index is now around 0.7% lower. This is despite markets recently trimming expectations for the Fed to pause hikes from 65% to 45% at their next meeting. However, today’s Core PCE price Index could still define the week. It is the Fed’s preferred index for measuring inflation, so it matters to us all. The latest estimates predict a decline from 0.6% to 0.4% over the previous month.

EUR

Inflation is starting to moderate in Europe, a pattern reflected elsewhere, as wholesale energy costs recede. That could be evidenced this morning with the release of the latest Regional harmonized CPI data. The yearly reading dropped from 8.5% to 6.9%, which was thankfully well under analyst estimates of 7.1%. However, core inflation remains annoyingly sticky and has just hit a record at 5.7%. That is likely to keep the ECB in a hawkish mood, which is one of the big reasons why EUR/USD has rallied over 1% this week, as markets price in further rate hikes from the ECB. 

GBP

The latest UK growth data beat estimates again, with quarterly growth increasing by 0.1% (QoQ). That figure rose to 0.6% annually, against an expected 0.4% increase. While the UK may not be growing quite at the fastest pace globally, the fact that the UK is growing at all is hugely impressive. The pound continues to benefit against this improving UK economic backdrop, with GBP/USD rallied by over 1% throughout the week, aided by that flagging dollar.  

JPY

The latest yearly headline Tokyo CPI dropped from 3.4% to 3.3% for the second month in a row, despite expectations for a much further fall over the past month. That news might frustrate outgoing BoJ governor Kuroda, who suggested recently that overall inflation is likely to reach the BoJ’s target of 2% soon. USD/JPY largely ignored the data and has rallied by over 2.2% throughout the week. The move has been driven by a significant unwind of safe-haven flows, despite dollar weakness elsewhere. 

CAD

Today’s Canadian growth data is likely to see monthly GDP increase by around 0.3% during January. That figure is up from -0.1% previously. It has been an excellent week for Loonie bulls, with USD/CAD dropping by the most since the beginning of November. So far, the pair has fallen by around 1.5%, driven by the powerful combination of a weakening greenback, higher oil prices, and stronger Canadian economic data.

MXN

As expected, the Mexican central bank (Banxico) raised Mexican interest rates by a further 0.25% to 11.25%. The vote was unanimous. Banxico also removed their explicit language referring to the possibility of future rate hikes, as they take a more dovish tone on future rate moves. The move has had little impact on slowing the recent Peso rally (USD/MXN drop), with USD/MXN down by nearly 2% over the week. 

BRL

The Brazilian economy added nearly 250K new jobs through February, which beat prior estimates of around 160K. Much the same as the preceding month, most of those gains came from within the service sector. The central bank also released the minutes of their most recent meeting yesterday, in which they decided to keep rates steady at 13.75%. If anything, the minutes sounded more hawkish than dovish, which will frustrate many analysts who had previously predicted a cut in Brazilian rates. USD/BRL has also fallen by a whopping 2.85% this week.