Home Daily Commentaries US Dollar clings to daily gains

US Dollar clings to daily gains

Daily Currency Update

The US dollar continued to add to its small gains from yesterday against its major peers. The US dollar index (DXY) reclaimed the 100.00 mark and is firmly sticking with its modest gains. Monthly housing data released by the US Census Bureau this morning showed that Housing Starts declined 8% month-over-month in June, following the 15.7% increase in May. Building Permits fell 3.7% in the same period, down sharply from May's 5.6% increase. This was clearly seen as missing the market expectations and there was no or very little impact on the market. The 10-year benchmark US Treasury bond yields continue to remain below 3.8%. The poor performance last week for the US Dollar shredded all its gains against major peers after the release of not-so-impressive inflation data, which in turn restored the expectations that the Federal Reserve has reached the terminal rate and markets are expecting on final 25 basis point (bps) rate hike in its policy meeting in July.

Key Movers

The euro was seen slacking against the USD, trading below the 1.1200 level. Inflation data released in the Eurozone revealed that the core inflation quickened more than the market’s expectations in June. Data showed that the Consumer Price Index (CPI) rose 5.5% year-over-year in June against the market expectations of a 5.4% bump. Markets are anticipating another rate hike by the European Central Bank (ECB) in its upcoming policy meeting in July, however, ECB officials have sounded less hawkish on the prospects of more hikes after summer.

In the UK the inflation cooled down more than anticipated in June. The numbers came in at 7.9% annually, which is the slowest in more than a year. The sterling slipped swiftly near the 1.2900 level against the USD after the data release. Adding to this, Lloyds Bank survey revealed that food inflation is anticipated to soften as producers have cut prices for the first time in more than three years as cost pressures have relented. Markets are expecting the Bank of England BoE may increase interest rates further by 100 bps this year, implying an interest rate peak at around 6.5%. This is in line with UK Prime Minister Rishi Sunak’s promise of halving inflation by the year-end ahead of a probable election in 2024.

West Texas Intermediate (WTI) oil has crossed the 75 mark and was last seen trading at 76.50 levels. Oil prices are expected to return to its upside journey as the inflationary pressures in the United States economy have started easing.

Expected Ranges

  • EUR/USD: 1.1182 - 1.1238 ▼
  • GBP/USD: 1.2879 - 1.3062 ▼
  • AUD/USD: 0.6755 - 0.6818 ▼
  • USD/CAD: 1.3159 - 1.3191 ▲