The unemployment rate in France hit a 25-year low and French consumer sentiment registered its best reading since the survey began helping to put a bid underneath the EURUSD throughout tonight’s trading as evidence mounted that the Eurozone recovery is spreading to the region’s second largest economy. The news bodes well for euro hawks looking for another rate hike out of the ECB before the end of the summer.

Later in the session attention will turn to US Personal income and spending data and rather than watching the absolute numbers traders will key off the spread between the two. If the spread is negative (spending larger than income) for the second month in a row, it would suggest that the US consumer is tapped out and could weaken the dollar further. The one possible offset to that scenario would be a hotter than forecast PCE Deflator figure which could keep inflation expectations elevated.

As we move into the summer season, the global macro theme developing in the market, shows that US growth is slowing materially relative to its major industrialized partners with the net we effect being that interest rate in both Euro-zone and UK are likely to increase while US rates will remain flat. Since global capital flows will always seek the highest rate of return this course of action could lead to further dollar declines unless US growth in Q3 reaccelarates – which is difficult to imagine given the persistent slide of the housing sector.

The one area of the globe where growth and most importantly price levels continue to stagnate is Japan. Little wonder then that the yen is the only currency showing no strength against the greenback in tonight’s trade. Japanese core CPI data once again printed negative at -0.1% registering 5th consecutive month of no increase in prices. The fact that core CPI data is still negative remains the most important factor weighing on the yen. Until there is proof of actual inflation in Japan the BOJ will be excruciatingly slow to tighten monetary policy and yen will only get bid during bouts of risk aversion.

Finally, the Canadian dollar broke multi decade highs with USDCAD dropping through the key 105 level and taking out stops all the way to 104.70. With oil trading at 70/bbl and market expectation of a BOC rate hike at the next meeting on July 10th sentiment on the loonie remains extraordinarily bullish. If oil prices continue to creep higher there is little reason to doubt that parity will be just a matter of time. Although positioning in CAD is most likely at overbought extremes, fading multi–year breakouts is generally a huge mistake in the currency markets as these price moves tend to reflect tectonic changes in economic outlook that are not easily or quickly reversed.

Boris Schlossberg is a Senior Currency Strategist at FXCM.