The United States Dollar, after trading stronger in the Asian and European sessions, is in familiar ranges and mixed territory against the G10 in the early US hours following a CPI report that was largely in line with expectations
Overview
Bond yields whipsawed following the 8:30AM data dump, emerging-market assets have continued to trade in their most positive manner in several weeks. Though much of the EM-positive move in the last 12 hours appears to be a simple risk reversal and recovery after a decidedly negative session yesterday, this morning’s relatively benign CPI report is helping to give risk-forward trading a boost.
This morning’s Consumer Price Index for the month of June showed that, close to trader expectations, prices grew just shy of 0.3% last month. Year-over-year, prices grew 2.7%, coming in slightly above market consensus, and core prices excluding volative items food and energy increased 2.9%. Though these numbers are above the Federal Reserve’s target of 2% inflation, this release does not represent the “worst-case” scenario that many – including several voting members of the Federal Open Market Committee – feared. The Fed has stated in several of its recent meetings that the monetary policy governing body of the US is concerned with a potential increase in inflation from the current Administration’s trade and tariff policies, but as of now, those concerns to appear to be a bit unfounded. Of course, the majority of the “Liberation Day” reciprocal tariffs imposed on April 2nd are on pause for the next 3 weeks, so the full inflationary impact of these rather punishing levies is yet to be seen. Nonetheless, today’s figures will only add fuel to the proverbial fire of the Admin and make the calls from the President and his officials to cut interest rates all the more relevant.
Though there is little on the data docket in the way of major releases for the US for the remainder of the week, this government has kept traders on their toes with rhetoric alone through the first half of this year, and it behooves markets to expect more of the same. With many major corporate earnings for Q2 set to hit the docket over the next few days, there’s little doubt that FX markets will continue to face previously-unprecedented volatility.
What to Watch This Week…
- UK CPI JUN, Wednesday
- US Retail Sales, Thursday 8:30AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
GBP ⇓
Pound Sterling, also not a beneficiary of the Buck’s relatively strong week, is continuing to underperform most of its G10 peers today and posting a roughly 0.15% loss against USD. Though today hasn’t seen any data releases from the UK to drive this price action, UK CPI is due out during the European session tomorrow. Markets expect that services inflation will remain well above the Bank of England’s target and come in at 4.5% – though this would be below the previous month’s figure, it would still represent entrenched inflation that clashes with an economy with stagnant-at-best growth.
JPY ⇓
Japanese Yen’s slide is continuing this morning versus the Buck, reaching its weakest price againt USD in two months today. Trading sessions in Asia and Europe have seen a substantial risk reversal from yesterday’s flight to safety, and JPY’s status as a traditional safe haven is not doing the currency any favors today. Domestic jitters surrounding the nation’s fiscual situation are continuing to vex markets ahead of a key upper-house election this weekend that could jeopardize the current majority party’s ability to pass legislation, keeping JPY depressed.
