USD - United States Dollar
The US dollar traded 0.06 percent to the downside this morning, continuing the trend experienced over the last few days. The consensus of market participants is a July rate cut from the Federal Reserve as the base case following Chairman Jerome Powell’s two-day testimony to Congress.
However, the US dollar reversed some of its losses yesterday after the US CPI surprised us to the upside and two of the FOMC members (Bostic & Barkin) pushed back on the need for a Fed cut in July. Atlanta’s Raphael Bostic and Richmond’s Thomas Barkin argued for the need for stimulus right now. Each of them cited the Dallas Fed’s trimmed mean measure of inflation, which has come in close to 2 percent in recent months. Bostic has traditionally been dovish, so his comments on inflation being “close to target” and his relatively satisfying view on policy both came as a surprise. Barkin said that he is "not seeing many cases for stepping on brakes or on gas.” As neither of them are voting on the FOMC this year, their arguments could well get lost.
The most crucial driver though was Powell’s second day of testimony, which mostly reinforced the market expectations of a July cut.
The Sterling is in a rally mode this morning despite Boris Johnson, the front-runner to become Prime Minister, frequently refusing to rule out suspending Parliament to advance through Brexit against its will.
In China, exports growth slowed to 1.3 percent in June and imports fell more than expected as the trade war continues with the U.S. and a global slowdown damages trade. Imports fell by a wider than expected 7.3 percent. The USD/CNH pair is trading to the upside 0.12 percent, showing a weaker Chinese Yuan or 6.8842 Yuan per U.S. dollar.
As expected, as soon as the news about negative-yielding European junk bonds made it to the front page, the "everything rally" came to an end. It will be interesting to see the impact of the bond market in the fx market and see where the Euro crosses are headed. For now, the EUR/USD pair is trading at 1.1245, showing no change since yesterday's close. However, gold is rising 0.27 percent, which provides a hint regarding U.S. dollar and Euro trading.
1.3020 - 1.3058 ▼EUR/USD:
1.1239 - 1.1271 ▼GBP/USD:
1.2511 - 1.2585 ▲AUD/USD:
0.6961 - 0.7031 ▲NZD/USD:
0.6645 - 0.6714 ▲