Limited action across majors as focus on US inflation update Thursday

Key Movers

Price action was well contained through trade on Tuesday with majors operating within a narrow range against the USD as investors square positions leading into tomorrow’s all-important US CPI inflation update. Markets largely ignored commentary from Fed Chari Jerome Powell as he addressed a senate committee hearing on monetary policy. Powell was not prepared to give any clear guidance as to the time and trajectory of potential rate cuts and as such market pricing for a July adjustment reflects expectations that a cut is highly unlikely. Instead, we look to September as the first realistic Fed meeting wherein a rate cut is in play. Before then we have 3 inflation prints and 2 labour market updates. These will prove key in shaping expectations and will drive near-term direction across majors. US yields were higher across the curve with both 10 and 2 year rates edging upward, helping prop up the USD and add pressure on the Yen. The Japanese yen was the worst-performing major unit giving up three-tenths of a percent, allowing the USD to break back above ¥161.30 and mark highs at ¥161.31. the euro held on above US$1.08 and bounced between US$1.0805 and US$1.0835 while the British pound edged below US$1.28 marking session lows at US$1.2778.
Our attention now turns to the RBNZ policy meeting and rate update ahead of commentary from Bank of England and European Central Bank officials and Powell’s 2nd day of testimony in front of the Senate committee.