The United States Dollar has managed to hold onto yesterday’s positive movements into this morning, marking the fourth straight session of gains for the Buck, and is trading close to flat against most major currencies to open the US session.
Overview
US CPI released yesterday morning, though not showing any large swing in either direction of market expectations, did show that corporations are beginning to pass on increased costs – likely due to tariffs – to consumers.
Certain facets of yesterday’s CPI show inflationary pressures at their highest in several years – appliance prices grew by the most in 5 years, toys jumped by the most since early 2021 and household furnishings and sports equipment hit their fastest rate since 2022. Core goods overall grew by 0.2% in June, but excluding cars from that number shows price growth of 0.55%, the biggest monthly advance of such a figure since November of 2021. As a result, odds of easing from the Federal Reserve decreased through the session, at one point implying just 44 basis points of cuts this year. Some of this move, however, has been pared this morning following the release of the Producer Price Inex this morning, showing that costs for producers of goods actually declined slightly in June. Part of this could be attributed to flagging demand, but when taken in conjunction with CPI from yesterday it becomes clear that corporations are in fact passing on more costs to consumers than they had previously. The Dollar’s reaction to this morning’s figures has been rather muted, and although there may be a bit of confirmation bias at play, markets have decided that the hot CPI reading from yesterday is more important.
The data calendar for the US, though not empty for the remainder of the week, is a bit calmer after this morning. Retail sales for June will be released tomorrow morning, along with some business inventory surveys and the manufacturing index from the Philadelphia Fed. Housing starts from June will be released Friday morning.
What to Watch This Week…
- US Retail Sales JUN, Thursday 8:30AM
- US Housing Starts JUN, Friday 10AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
GBP ⇑
Pound Sterling, after sliding more than most of its major peers versus the Dollar through yesterday’s session, is trading slightly stronger this morning and has gained a tenth of a percent from Tuesday’s close. The UK’s inflation data for June, released this morning, came out above expectations – the headline measure showed price growth of 3.6%, and the core figure read in at 3.5%. This is well above the Bank of England’s own forecasts and will no doubt put pressure on the central bank, especially given a string of either stagnant or negative GDP readings. The BoE is still likely to cut interest rates in early August given these GDP pressures.
JPY ⇑
Japanese Yen, following a several-session losing streak against USD, is attempting to turn its fortunes around and is trading just more than a tenth of a percent stronger versus the Buck. JPY is still, though, just off its weakest point since early April as traders continue to eye its upper-house election over the weekend as a substantial risk event. The majority party LDP’s lead is continuing to erode, and the results of this election should be clear before the FX market reopens Monday morning, but Monday is a public holiday in Japan and thin liquidity will likely result in quite volatile trading for JPY.
