Forex today: Softer greenback ahead of the US CPI key event today

The greenback was somewhat weaker on Tuesday as positions were pared back, likely to do with the major risk event in the US CPI coming up later today, but also possible down to President Trump who has been complaining that the dollar is unjustly higher than what he sees to be as competitor nation's currencies, such as the euro and others. Trump tweeted saying that the euro “and other currencies are devalued against the dollar,” holding the Fe to blame again, arguing that the U.S. rates are “way too high”.

Elsewhere, sterling was a stand out performer amongst an otherwise sleepy FX space. While the headline unemployment remained at 3.8%, overall, the UK's April/May employment report was solid, beating the market's expectations and despite the Brexit angst. The detail held a surprise improvement in both employment (+32k, est. +4k) and average wages (+3.4% 3m/y, est. +3.2%). However, more importantly, especially in an environment where major central banks are moving towards a more accommodative approach to monetary policy, the MPC members are all lining up the ducks in a row with a hawkish bias. Overnight, both Saunders and Broadbent added to comments from fellow MPC member Haldane comments arguing that rates would be higher under a smooth Brexit.

As for U.S. data, headline producer prices came in as expected for May, at 0.1% m/m, down from 0.2% in April. "Similarly, the core measure met expectations, rising by 0.2% m/m in May. On a yearly basis, the headline PPI figure missed expectations; coming in at 1.8% y/y (from 2.2% in April) but the yearly core figure came in as expected, at 2.3% y/y (from 2.4% in April). Producer prices excluding food, energy and trade services rose 0.4% in May (unchanged from the month prior) whilst rising 2.3% y/y (from 2.2% in April)."

Analysts at Westpac note the Fx space price action and key events ahead further down:

• EUR/USD rose from 1.1310 to 1.1337. 
• GBP/USD bounced off 1.2670 late Sydney to 1.2730.
• USD/JPY initially rose to 108.80 but then fell to 108.50. 
• AUD/USD continued its quiet trade, only a 20 pip range over 24 hours, hovering around 0.6960. Underperformer NZD extended yesterday’s decline to 0.6569 before steadying around 0.6585. 
• AUD/NZD rose steadily, up 40 pips on the day to 1.0580.

Key notes from Wall Street:

Wall Street's bullish streak gets capped, DJIA rested at R1

Key events ahead: 

• The June Westpac-Melbourne Institute Australia consumer sentiment survey is due at 10:30am Syd/8:30am Sing/HK. 

• May consumer and producer prices (11:30am Syd/9:30am local). The median forecast is 2.7%yr on CPI and 0.6%yr on PPI.

• The US data focus is May CPI.