Continuing the broad trend established so far in the month of June, the United States Dollar starts the week slightly on the back foot against most currencies and all majors.
Overview
With little on the data docket for this morning, USD will likely remain in somewhat of a holding pattern in current ranges before a slew of data releases and central bank decisions later this week.
Before the Federal Reserve releases its next interest rate decision Wednesday afternoon, the US Consumer Price Index inflation reading for May hits the wire Tuesday morning and could prove to be still quite the thorn in the side of the Fed. Currently, expectations show just a 0.2% increase for May, but any upside surprise might drive the Buck up and force the Fed to hike again. Chair Jerome Powell has reinforced the market view that the Fed may “skip” this month before raising interest rates in July to assess the full impact of this hiking cycle on both inflation and the broader economy, but this is far from a done deal. A 28 percent chance of a 25 basis point hike remains this month, with a larger chance in July – a bit of an “either/or” scenario.
After the Fed’s decision Wednesday, the US will also release retail sales data for May on Thursday, which could prove the Fed right or wrong. Across the globe, the UK also releases its CPI on Wednesday, and the European Central Bank’s latest interest rate decision comes on Thursday, followed by the Bank of Japan Friday.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇑
The single currency this morning is up roughly a quarter of a percent against the USD this morning as the potential of divergent decisions from the Federal Reserve and European Central Bank this week drive price action. Compared with a paltry 28% chance of a hike this week from the Fed, the ECB’s potential 25 basis point hike on Thursday is all but a done deal as Eurozone inflation remains higher than that of the US. EUR will likely remain in these ranges until both central banks act later this week.
AUD ⇑
The Australian Dollar continues its winning streak against USD this morning as US equities are up and a more risk-forward mood takes over the market. AUD has proven to be quite strong against the Buck this month, gaining nearly three percent since June 1. On the heels of the Reserve Bank of Australia’s surprise hike last week and expectations of a “skip” this week from the Federal Reserve, we see the possibility of continued AUD strength through the month.
