Forex today was a mixed bag for the greenback, finishing pretty much flat on the session.
The session came with PPI's, Fed speakers Brainard ("I want the policy to be responsive to changes in conditions."), Kaplan ( Urges that there is patience on rate hikes citing low inflation." Will be appropriate to begin trimming balance sheet later this year.") and as well as Yellen's final comments with some US political hype on the fringes.
Yellen's testimony was disappointing in respect to market moving substance and the sentiment remains that there will not be any further rate hikes until it is clearly evident that inflation remains on course and that the economy continues to grow. "3% US growth "quite challenging" in coming years," she argued, adding that the balance sheet shrinkage would probably steepen the yield curve and rate rose, 10 years +1.23% to 2.34%. CPI is now key for direction in the greenback and that arrives tomorrow.
On the political front, Trump met with Macron, dining at the top of the Eiffel Tower and greeting with yet another awkward handshake. There was some discussion around Syria, with Macron saying the intelligence cooperation was strong and that the governments shared a common "red line" in Syria against chemical weapons attacks. Closer to home, the US Health Care Bill came out, 172 pages of it, called the "Better Care Reconciliation Act" and still is awaiting all of the Republican Senators to go through it, so nothing noteworthy for markets yet, but it is unlikely to appease all senators.
As for the currencies, markets were not impressed with ECB ‘sources’ story about QE move at Sep 7 meeting, EUR - 0.11% at 1.1400. Hawkish BoE McCafferty's comments on UK QE unwind has propped up the pound, GBP +0.44% at 1.2943. The yen was strong despite a positive Wall Street, weighed by the EUR/JPY cross while eyes remain on the US Senate that is still short on health care votes, USD/JPY +0.07%. Commodity currencies lifted on carry-trade vouge, NZD +0.81%, AUD +0.70%, CAD +0.21% (WTI +1.2).
Asian day ahead:
"NZ has manufacturing PMI which has been reflecting a healthy level of activity.
Japan: Jun industrial production fell 3.3% in May reversing Apr’s jump, but the yearly growth is a robust 6.8%yr with PMIs suggesting a continuing uptrend," - Westpac
Key events from the US session:
- Wall Street closed with modest gains as earnings awaited
- Rep. Senator Capito: Have “serious concerns” about medicaid provisions in revised proposal
- US CPI expectations? - Nomura
- Fed's Kaplan: Future removal of accommodation should be done patiently, gradually
- Fed's Yellen speech: Will be challenging to reach 3% economic growth over the next few years
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