US dollar Strengthens Against Peers ahead of Inflation Data

US dollar Strengthens Against Peers ahead of Inflation Data


Major U.S. indices rebounded during the Asian session on the news that U.S. and China have held multiple discussions. Officials declared that the Trump administration is open for further discussions. The fears of a trade war between the two biggest economies cooled down and supported the global indices. The Dow Jones traded at a high of 24800 ahead of the European session, and the SPX is trading at a high of 2784.


The Dollar index which measures the greenback against a basket of major currencies rose to 94.79, the highest level since July 3rd. The Producer Price Index Year-on-Year rose to 3.4% versus an expectation of 3.1%. The higher PPI signaled that the inflation levels could go higher than the target of the Federal Reserve for a while, which favors the current monetary policy stance of the Federal Reserve. The Consumer Price Index for June will be released today.


The United States dollar rose against the Japanese Yen to reach a six-month high of 112.38. The cooldown of the trade war fears lessened the demand for the safe haven currency. Moreover, the divergence of the monetary policy between the Bank of Japan and the Federal Reserve is providing support to the pair. The Federal Reserve is proceeding further toward neutral interest rate levels whereas the Bank of Japan is still away from its price target which will delay the tightening of its monetary policy. From a technical analysis perspective, the USDJPY breached a trend line formed by combining the lower highs of 2015-16-17.


The Bank of Canada hiked interest rates by 0.25% to 1.50% from 1.25% prior. Despite the interest rate hike, the Canadian dollar weakened against the United States dollar. USDCAD traded at a high of 1.3218, its highest level since July 2nd. The BoC governor Poloz said that the economy is in a good place, but he stated that the monetary policy is data dependent. Moreover, the BoC addressed the risks arising from the trade tensions.


Gold prices tumbled almost one percent to trade near 2018 lows. The bullion declined from $1255 to settle at $1243. On the other hand, the silver ounce dropped to a fresh 2018 low of $15.74.


Oil prices fell more than five percent yesterday despite the huge drawdown in the crude oil inventories. The Energy Information Administration reported that the US crude oil inventories fell by 12.633 million barrels versus an expectation of 3.788 million barrels. However, the West Texas Intermediate declined from $74.24 to settle at a two-week low of $70.56 whereas Brent dropped from $78.84 to close at a two-week low of 74.09. Several factors weighed on the oil prices, such as the expectation of a slowdown in the global economy, possible tariffs from China on US oil imports, the possible termination of Afghanistan war, and the possibilities that Libya could lift restrictions on four oil ports which would help to raise the exports.

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12:30 US Core CPI (MoM) (Jun) 0.2% 0.2%
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