EUR / USD
In comments on Thursday, Fed Chair Powell stated that the process of getting inflation to the 2% target has a long way to go. He added that the labour market is very tight while it will take time for the rest of the economy to feel the full impact of rate hikes to date.
The comments from Powell continued to suggest that the central bank will be looking to hike rates in July unless there is a compelling reason not to.
Markets have, however, priced in a rate increase for July and the dollar failed to gain any further traction on the comments.
The latest data recorded a net deterioration in industrial and consumer sentiment for June. The overall business and consumer survey dipped to 95.3 for June from 96.4 previously and below consensus forecasts of 96.0.
German consumer prices increased 0.3% for June with the year-on-year rate increasing to 6.4% from 6.1% and slightly above expectations of 6.3%.
The Euro posted significant gains into Thursday’s New York open with a peak around 1.0940 against the US dollar.
The dollar, however, posted sharp gains after the US data with the Euro sliding to lows around 1.0860 before a tentative recovery.
Narrow ranges prevailed in early Europe on Friday with the Euro around 1.0870, but there will be volatility later in the day with US prices data and significant quarter-end position adjustment. US markets will also have a shortened trading day on Monday, amplifying potential position adjustment on Friday.
JPY
US initial jobless claims decline to 239,000 in the latest week from a revised 265,000 previously and below expectations of 266,000. Continuing claims also declined to 1.74mn from a revised 1.76mn the previous week. The data dampened concerns over an easing of the labour market.
First-quarter GDP data recorded revised growth of 2.0% after the previous estimate of 1.4% with an upward revision to GDP sales. There was a slight downward revision to 4.1% from 4.2% previously. May pending home sales declined 2.7% for May after a 0.4% decline the previous month.
Stronger than expected claims data and higher yields triggered renewed dollar buying with the US currency posting fresh 7-month highs just above 144.90.
Atlanta Fed President Bostic stated that he doesn’t see as much urgency to move on interest rates than others. He did, however, also comment that nobody should take a signal from my view that that the bank should pause. He added that there are undoubtedly scenarios where the Fed could move at two meetings in a row.
The message was mixed, but the overall rhetoric was dovish. The comments triggered erratic dollar moves, but the US currency held a firm overall tone.
China’s manufacturing PMI index edged marginally higher to 49.0 from 48.8 previously while the non-manufacturing index edged retreated to 53.2 from 54.5.
The Japanese Finance Minister again warned over excessive yen losses and, although the dollar posted fresh 7-month highs just above 145.00, the dollar was unable to hold this level and retreated to 144.70 around the European open. Markets will remain wary over intervention by the Bank of Japan.
GBP
UK data recorded an increase in mortgage approvals to 50,500 in May from a revised 49,000 the previous month and slightly above consensus forecasts. There was, however, a second successive decline in mortgage lending for the month with a small net increase in personal lending. The data also recorded a sharp decline in bank deposits for the month. The data triggered some concerns over a squeeze on the consumer sector and a risk that there will be deterioration in the economy, although the market impact was limited with the 2-year yield holding above the 5.20% level which underpinned capital inflows.
Sterling was unable to hold above 1.2650 against the dollar and dipped to lows at 1.2590 as the US currency strengthened.
There was a recovery back above 1.2600 at the European close while the Euro retreated to 0.8615.
There will be choppy trading associated with position adjustment later in the day and the UK currency traded around 1.2620 on Friday.
CHF
The Swiss franc was held in relatively narrow ranges during Thursday. Expectations of higher global interest rates limited franc support, but there were also reservations over global growth trends. The Euro was unable to hold above the 0.9800 level against the franc and settled around 0.9775. The dollar tested the 0.9000 level before settling around 0.8985. The dollar consolidated just below the 0.9000 level in early Europe on Friday.
Technical Levels
