Forex Today: Dollar stabilizes, commodities slide, and central banks hike

After the central bank meetings and Fed Chair Powell's comments, attention will turn back to economic data. On Friday, the flash readings of the PMIs are due, starting with Australian numbers in the Asian session. Another relevant report will be Japanese inflation. Later in Europe, Eurozone PMIs and UK Retail Sales data will be released.

Here is what you need to know on Friday, June 23:

US equities finished mixed on Thursday, while crude oil and commodities tumbled. At the same time, US Treasury yields moved higher. Markets digested rate hikes from the Swiss National Bank and the Bank of England and the second day of testimony from Federal Reserve Chair Powell, who repeated that interest rates would likely rise further.

The latest data releases in the US were mixed. Initial Jobless Claims totaled 264,000 in the week ending June 17, the highest level since October 2021; on the positive side, Continuing Claims declined to 1.759 million. The Chicago Fed National Activity Index fell in May to -0.15 from 0.14. Existing Home Sales rose to 4.3 million (annual rate), surpassing expectations and offering another strong number from the housing sector. On Friday, the US S&P Global PMI are due. Fed speakers include Bullard, Mester and Bostic. 

The US Dollar Index rose marginally but enough to end a three-day negative streak to close near 102.50 after hitting weekly lows under 102.00. The US 10-year Treasury bond yield rose and settled at 3.79%, near the weekly range top. The 2-year yield closed at 4.79%, its highest since March.

EUR/USD pulled back from monthly highs above 1.1000 to the 1.0950 area. The trend is up, but the pair lost bullish momentum. On Friday, the Eurozone HICP PMI will be released. These numbers will offer the first glimpse of economic performance in June.

The Bank of England raised interest rates by 50 basis points in a 7-2 vote. Despite the larger-than-consensus hike, the Pound weakened. The announcement points to more tightening ahead. The slide of the Sterling reflects concerns about the economic outlook and the potential impact of rate hikes on activity. More economic data is due from the UK on Friday, including May Retail Sales and the June S&P Global PMI. GBP/USD finished lower, below 1.2750, in a volatile session. 

Analysts at Wells Fargo: 

We doubt wage or price inflation will cool substantially by the time of the Bank of England's August announcement. With the BoE's economic projections in August likely to show much higher inflation forecasts, we expect the U.K. central bank to deliver another 50 bps rate increase to 5.50%. Beyond that, we also see a 25 bps hike to 5.75% in September, which we expect to be the peak for the current cycle.

USD/JPY rose above 143.00 and posted its highest close since November. The Japanese Yen fell across the board amid higher government bond yields and the monetary policy divergence. In Japan, the National Consumer Price Index is due on Friday before the Jibun Bank PMI. The inflation figures are crucial for expectations about when the Bank of Japan could abandon its ultra-accommodative monetary policy. The annual rate is expected to rise from 3.5% to 4.1%. 

USD/CHF finished modestly higher, around the 0.8950 area. The pair continues to move sideways with a bearish bias. As expected, the Swiss National Bank (SNB) raised its key interest rate by 25 basis points to 1.75%.

AUD/USD dropped and posted the lowest close in a week, around 0.6750. The pair has support at 0.6745/50. The Australian S&P Global PMI is due on Thursday.

USD/CAD fell despite lower crude oil prices and posted the lowest close since October 2021, around 1.3150. The Loonie outperformed.

The Central Bank of the Republic of Turkey raised interest rates from 8.5% to 15%. The Norges Bank hiked its policy rate by 50 bps to 3.75%. As expected, the Bank of Mexico kept interest rates unchanged at 11.25%. Bank Indonesia kept the repo policy rate intact, as expected, at 5.75%. 

 

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