Daily Currency Update

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The US dollar index is increasing 0.05 percent following in line inflation numbers

USD - United States Dollar

The consumer price index (CPI) increased 0.1 percent in May after rising 0.3 percent in April. Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment, versus the 1.9 percent expected. The index for all items less food and energy increased 0.1 percent for the fourth consecutive month. The index for all items less food and energy rose 2.0 percent over the last 12 months, versus the read of 2.1 percent.

Both U.S. Commerce Secretary Wilbur Ross and Acting White House Chief of Staff Mulvaney downplayed that the U.S. and China would reach a deal at the G20. This could explain why the FX market moved from a "risk on" mode to a "risk off" mode quickly during the trading session yesterday, pushing the Swiss Franc and Japanese Yen higher.

President Donald Trump identified himself as the main obstacle to a China trade accord. He said: "It's me right now that's holding up the deal," accusing Beijing of backtracking on a potential agreement. On top of that, Trump slammed the Fed for a second straight day, saying officials, "…don't have a clue!" The president also tweeted that rates are, "…way too high," accusing the central bank of pursuing, "…ridiculous quantitative tightening," and called slow inflation, "…a beautiful thing." He also complained that the Euro and other currencies were "devalued" against the dollar.

Key Movers

China announced more stimulus amid the 12th consecutive month of decline in its car sales, a historic slump that's showing no signs of recovery as trade tensions weigh on consumer sentiment. Nonetheless, emerging market currencies increased yesterday against the Greenback (ZAR +1 percent, MXN +0.44 percent) in what seems to be a catch-up to the recent U.S. dollar weakness. BofAML warned that the truce between the U.S. and Mexico might be temporary and that we might be back in the same situation in 3 months if Mexico does not show progress in stopping immigration.

In Australia, bearish views don’t stop coming from investment banks, with markets already pricing in more RBA easing, including an 80 percent chance of a third cut by the end of the year.

Demand for crude oil remains uncertain despite leaders from Saudi Arabia and Russia expressing solidarity in their relationship and their commitment to OPEC, which alleviates previous concerns that the two leaders were in dispute. However, crude oil is falling around 1.75 percent this morning.

According to BNY Mellon, the rally seen in the Canadian dollar is more about the positioning of market participants than a significant change in the fundamentals that drove the Loonie higher over the last few days. More market participants were selling the Loonie (buying USD/CAD) since the beginning of the year, but it is highly likely that the change in the U.S. monetary policy expectations in the Fed has provided the catalyst to unwind those positions.

Expected Ranges

USD/CAD: 1.3273 - 1.3330 ▲

EUR/USD: 1.1275 - 1.1330 ▼

GBP/USD: 1.2674 - 1.2743 ▼

AUD/USD: 0.6939 - 0.6965 ▼

NZD/USD: 0.6562 - 0.6613 ▲