EUR / USD
The latest data recorded a weaker reading for Italian industrial confidence, but there was a notable recovery in consumer confidence.
ECB President Lagarde stated that the Euro-Zone had entered a new inflation phase which could linger for some time. She was particularly concerned over the labour market with workers attempting to regain purchasing power. In this context, she added that it is unlikely that, in the near future, the bank will be able to state with full confidence that interest rates have peaked.
Council member Simkis stated that the central bank should not rule out a September rate hike with the bank not done in raising rates.
Fellow member Kazaks stated that market bets on a rate cut early in 2024 are wrong.
ECB sources suggested that there was little chance of a pause in rate hikes in July or September given stubborn inflation pressures.
The German yield curve inverted further after the comments with and became the most inverted for over 30 years into the New York open which will tend to support the Euro. Euro-Zone peripheral yield spreads held broadly steady which limited the scope for Euro selling and the hawkish overall rhetoric triggered further buying interest.
The dollar overall lost some traction and the Euro moved to above 1.0950 ahead of the US data.
From a peak at 1.0975, the Euro edged lower as the dollar recovered some ground. The Euro settled close to 1.0950 on Wednesday with markets braced for further comments from global central bank speakers and continuing to monitor overall risk trends.
JPY
US durable goods orders increased 1.7% for May after a revised 1.2% increase the previous month and compared with consensus forecasts of a 1.0% decline. There was again a solid increase in transport orders with the core increase held at 0.6% after a 0.6% decline the previous month.
US consumer confidence increased more substantially than expected with a jump to 19.7 for June from a revised 102.5 previously and above consensus forecasts of 104.0. There were net gains in the current situation and expectations components with improved confidence in the labour market.
New home sales increased to an annual rate of 763,000 from a revised 680,000 and above expectations of 675,000.
The Richmond Fed manufacturing index improved to –7 from –15 previously and slightly stronger than the forecast of –12. Orders remained in negative territory for the month while there was a small increase in employment and a net easing of inflation pressures.
Treasuries had gained ground into the US open, but posted significant losses after the US data.
Higher yields boosted the US currency with the dollar posting strong gains to fresh 7-month highs around 144.20 before settling close to 144.00.
Japanese vice Finance Minister for International Affairs Kanda stated that appropriate action will be taken against excessive currency moves and is monitoring moves with a sense of urgency. Markets were wary over intervention which curbed scope for yen selling and the dollar settled close to 144.00 against the yen.
GBP
Bank of England MPC member Dhingra stated that wages are responding to inflation with a lag. She added that the latest producer prices data is promising, especially as the PPI data is a promising leading indicator of retail inflation. She added that there is a lag between PPI falls of one or two quarters.
UK 2-year gilts continued to lose ground during the day with the 2-year yield posting fresh 15-year highs above 5.25%.
Higher yields provided net Sterling support, although there were further concerns surrounding the economic impact given that mortgage rates will be under further upwards pressure. After finding support close to 1.2700, the UK currency advanced to the 1.2750 area while the Euro posted a net gain to near 0.8600.
Sterling drifted on Wednesday and traded around 1.2735 against the dollar with the Euro close to the 0.8600 level.
CHF
The hawkish ECB rhetoric underpinned the Euro against the franc during Tuesday, especially with risk conditions slightly more favourable. Higher global yields also limited potential franc support during the day. The Euro pushed to challenge resistance above the 0.9800 level and settled close to this level. The dollar posted a limited net decline to just below 0.8940 from lows around 0.8925. The dollar settled just below 0.8950 on Wednesday with global central bank comments remaining in focus.
Technical Levels
Economic Calendar
