Forex Today: Hot UK inflation supports Pound Sterling, eyes on Powell testimony

Eren Sengezer FXStreet

Here is what you need to know on Wednesday, June 21:

The risk-averse market environment helps the US dollar (USD) hold its ground mid-week as investors await FOMC Chairman Jerome Powell's testimony before the House Financial Services Committee. The economic calendar will not be offering any high-impact macroeconomic data releases and comments from central bank officials will be looked upon for fresh catalysts.

Reflecting the sour market mood, Shanghai Composite and Hang Seng indexes both lost more than 1% on Wednesday. Additionally, US stock index futures trade in negative territory following the dismal performance of major equity indexes on Tuesday. The US Dollar Index (DXY) clings to small daily gains above 102.50 after having closed the previous three trading days in the green.

Hot inflation data from the UK helped Pound Sterling find demand in the early European morning on Wednesday. Annual inflation, as measured by the change in the Consumer price Index (CPI), held steady at 8.7% in May, surpassing the market expectation of 8.4%. The Core CPI, which excludes volatile food and energy prices, rose 7.1% in the same period, compared to analysts' estimate of 6.8%. On an encouraging note, the Producer Price Index declined on a monthly basis. Following an initial spike above 1.2800, GBP/USD edged lower and stabilized above 1.2750.

EUR/USD continues to fluctuate in a very tight channel above 1.0900 for the second straight day on Wednesday. European Central Bank (ECB) policymakers Joachim Nagel, Isabelle Schnabel and Fabio Panetta will be speaking later in the day.

Following Tuesday's slide, USD/JPY gathered bullish momentum and was last seen trading above 142.00. “The Bank of Japan (BoJ) will patiently maintain an easy monetary policy to stably and sustainably achieve the 2% price target accompanied by wage growth,” the central bank Governor Kazuo Ueda repeated on Wednesday.

USD/CAD moves up and down in a narrow band above 1.3200. Statistics Canada will release Retail Sales data for April later in the session.

AUD/USD stays under bearish pressure and trades in negative territory below 0.6800 on Wednesday.

Gold price suffered large losses on Tuesday as investors reacted to the potential negative impact of a slowdown in China to the yellow metal's demand outlook. XAU/USD stays relatively quiet below $1,940 early Wednesday.

Bitcoin gathered bullish momentum and advanced to its strongest level since the first week of May above $28,800. Ethereum gained more than 3% on Tuesday and extended its rally to beyond $1,800 early Wednesday.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.