The Fed consistently repeats it will look through the temporary inflation uptick
|Currencies
Both dollar weakness(low real yields) and euro strength (vaccinations) brought EUR/USD back within the 1.22 area. Lacking clear catalysts (eg.divergence in monetary policy, economic data), the couple is now stabilizing.
EUR/GBP is trapped within a tight sideways trading channel. Hawkish comments from BoE policymakers Vlieghe, Ramsden or Cunliffe are not yet triggering tightening bets in a sustained way. EUR/GBP 0.86 is turning out to be the couple’s favourite playground for the time being.
USD/JPY has become an alternating balance of weakness between the dollar and the yen in recent weeks: choppy trading in a narrow upward trend channel close to 110.
CE currencies rallied late. In EUR/CZK, the krone gained on incoming interest rate support as announced by the central bank. The CNB is deviating from the common central bank view that inflation will be completely temporary. A first-rate hike is possible in August.EUR/CZK is attacking 25.45 support.
Continued strong inflation prints triggered a verbal stance by the Hungarian central bank. Its deputy governor Virag said the first-rate hike in June, after a new MNB inflation report, would be necessary to ensure price stability.EUR/HUF 343 is a strong support zone though.
Inflation in Poland also ticked higher. While some members of the NBP governing council argue for a(symbolic) rate hike, the majority is still against tightening. Nevertheless, the market thinks the central bank will have to change tack eventually, keeping the zloty near recent highs. EUR/PLN is near 4.45 support.
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