Forex today was dominated by the US CPI data and the FOMC outcome while Yellen continued to cuation markets not to be concerned about temporary price pressures
The DXY and yields got a kicking on the back of the surprise miss in CPI and retail sales data. However, the FOMC statement and Yellen’s bullish & hawkish tone was enough to rescue to the dollar, at least to some extent – markets are not completely convinced.
US key data:
US CPI YY, NSA arrived at 1.9% v 2.0% expected and 2.2% prev. US Core CPI YY, NSA arrived at 1.7% v 1.9% expected and 1.9% prev. US Retail sales MM -0.3% v 0.1% expected and 0.4% prev. Atlanta Fed’s GDPNow has Q2 GDP +3.2% from 3% on June 9th.
DXY is down just 0.2% at the time of writing at 96.95 having recovered from post-CPI lows of 96.32. US yields in the benchmark 10 year are at 2.1308% and down -3.62%. They were as low as 2.1013 post CPI.
Fed’s Yellen and presser key notes:
- Job growth still well above pace needed to absorb new entrants to labor force.
- Additional gradual rate hikes will be appropriate over next few years.
- Fed wants to give advance warnings about balance sheet policy.
Elsewhere, Junior UK Brexit minister Baker said, “We need to be able to control our trade policy post Brexit.” ECB’s Hansson said, “Delay in ECB stimulus effect does not justify more easing.” ECB’S Nowotny also hit the wires and said, “I don’t rule out a fall in inflation in 2017 and 2018 if euro appreciates.”
EUR/USD made an initial fresh high on the FOMC statement but then reversed all gains and ended lower than pre FOMC levels after Yellen comments; +0.08% at 1.1220, high was 1.1296. USD/JPY ended lower with stocks underperforming o/n although recovering from the lows of 108.83 on Yellen to 109.61 closing price -0.42%. GBP/USD is virtually unchanged at 1.2751. Gold lower on DXY. AUD and NZD currencies less positive on hawkish Fed, AUD +0.71%, NZD +0.66%.
Key data from Asia:
GMT: 22:45 NZ GDP – Annual YY expected 2.7% vs 2.7% prev
GMT: 01:30 AU Unemployment rate expected 5.7% vs 5.7% prev
Key notes from US session: