Euro unchanged at ECB, BOC maintains status quo, US CPI next
Summary: IN Dollar completed another sluggish trading session little changed tonight US inflation report (22:30 Sydney). Measure currency volatility (Deutsche Bank currency Volatility index) reached its lowest level since February 2020 sank even more on Tuesday and yesterday, reports Reuters… Worldwide Treasury Yields fell sharply as benchmark fell by four basis points 10-year US rate up to 1.49%. German 10-year Bund Yield relieved -0.25% of -0.23% yesterday. IN Euro slowly climbed higher to 1.2175 (1.2172 yesterday) at the end New York after reaching the peak 1.22179. Markets will follow Monetary Policy of the European Central Bank ad after him a meeting (21:45, Sydney). While ECB widely expected maintain policy settings, traders will follow any leads tapering to his purchase of bonds program. Previously Bank of Canada left my key interest rate unchanged in 0.25% as expected. IN BOC also decided support this is current politics of quantitative easing. IN US dollar / Canadian dollar couple fell on 1.2057 night low before reversal to close in 1.2113, has changed little since yesterday 1.2110. Sterling weakened 0.27% to 1.4113 Close (1.4140 yesterday). IN Australian dollar was modestly lower before 0.7730 (0.7740) while Qiwi (NZD / USD) finished 0.10% lower before 0.7177 (0.7194). Vs Japanese Yenthen Greenback close to 109.63 of 109.50 despite the lower US bond yields. IN Dollar Index (USD / DXY) indicator belonging Dollar value vs basket of 5 major currencies, closed in 90.15 of 90.12.
Wall Street Stocks weakened after reaching near-record highs after falling Treasury yield. IN Preschool settled in 34 477 (34 607) while S&P 500 relieved 4223 (yesterday – 4227).
Data released yesterday saw China May CPI (YoY) climb on 1.3% of April 0.9%, but below the average forecast for 1.6%. China May PPI (YoY) rose flower 9.0%, beating rating 8.5% and higher than April 6.8%. There were no other primary economic data yesterday.
- EUR / USD – the common currency traded in a dim range of 1.21642 and 1.21941, to close at 1.2173 in New York. The focus is on the meeting of the European Central Bank and the announcement of monetary policy. The euro ended trading on a stable basis, which is encouraging about the results of today’s ECB event.
- GBP / USD – Sterling fell against both the dollar and the euro (EUR / GBP rose). The British pound closed at 1.4113 (1.4152). Tonight is also expected to publish the report on the US consumer price index, which supported the US dollar. Which, in turn, put pressure on the GBP / USD.
- AUD / USD – The Australian dollar closed at 0.7730 from 0.7740 yesterday ahead of the ECB meeting and US inflation report (22:30 in Sydney). The yield on Australia’s 10-year Treasury bonds fell 3 basis points in tandem with its US and global counterparts.
- USD / CAD – The dollar initially fell (overnight low at 1.20573) following the Bank of Canada’s monetary policy meeting and announcement. The Bank of China left interest rates unchanged and maintained its current quantitative easing policy. USD / CAD bounced to close at 1.2113 in New York, barely changing from yesterday’s opening at 1.2110.
Looking for: Traders and investors will be focusing on two key events tonight: the ECB meeting and policy announcement, and the US CPI report. The European Central Bank is expected to maintain the status quo (and keep its base funding rate at 0.0%), but market participants will look for clues to any narrowing of the ECB’s bond buying program based on its economic forecasts.
Major forecasts for the US CPI (May) suggest a decline on a monthly basis to 0.4% from 0.8% in April. Analysts expect the core CPI to fall from 0.9% to 0.4%. The annual headline CPI is projected to grow to 4.7% from 4.2% in April. The annual core CPI is forecast at 3.4% in May from 3.0% in April.
Other data slated for release starts with Japan’s May Producer Price Index (PPI) (monthly target price 0.5% versus Finlogix’s 0.7%). European data starts with French industrial production forecast (April) falling to 0.5% from 0.8%. China issues new loans in RMB (May) (f / c 1.410 billion yuan out of 1.470 billion yuan in April). Italy publishes April industrial production report (f / c 0.3% vs. -0.1% Finlogix). Weekly US jobless claims complete today’s reports (370,000 y / y, up from 385,000 in the previous week).
Trading perspective: It’s all about the ECB’s monetary policy announcement, its economic forecasts, and any talk of a cut. Meanwhile, US inflation figures must exceed expectations to lift the dollar out of its doldrums. The next change in the yield on 10-year US bonds is critical to the health of the dollar. While the Federal Reserve said it considers the rise in inflation to be temporary, the higher CPI (H / L CPI 0.8% or higher and Core CPI 0.9% or higher) cannot be ignored. Expect further consolidation within recent ranges to continue in Asia until today’s major twin events.
- EUR / USD – The euro traded steadily after the ECB meeting and the announcement of monetary policy. The single currency closed at 1.2176, close to the 1.2200 resistance area. EUR / USD has immediate resistance at 1.2200, followed by 1.2220. The overnight high for the single currency was 1.22179. Immediate support is at 1.2150 and 1.2120. Look for the EUR / USD pair, which will initially trade in the 1.2160-1.2220 range. The risk is that the euro will fall in the event of disappointment from the ECB.
- GBP / USD – Sterling declined against both the US dollar and the euro. The British pound closed at 1.4110, close to the overnight low of 1.41086. The pound sterling hit an overnight high of 1.41890 earlier that trading day. Ahead of the G7 meeting this weekend in Cornwall, England, attention has shifted to a meeting between US President Joe Biden and British Prime Minister Boris Johnson. Biden disagrees with the UK’s treatment of Northern Ireland over Brexit. Which influenced the pound. GBP / USD has immediate support at 1.4100 (overnight lows of 1.41089) and 1.4070. The nearest resistance is at 14130 and 1.4160, 1.4190. Expect the pound to trade in a likely range of 1.4080-1.4180 today. There might be fireworks tonight.
- AUD / USD – The Australian dollar continues to trade against the US dollar. AUD / USD traded in a dim range of its own between 0.7724 and 0.7762, to close at 0.7730. The Aussie has immediate support at 0.7720, followed by 0.7690. The nearest resistance is at 0.7760, followed by 0.7790. Expect the Aussie to trade within a likely range of 0.7710-0.7770 with the US dollar in mind. And what happens tonight.
- USD / CAD – Against the loonie, the dollar ended unchanged at 1.2113 (1.2110 yesterday). The dollar fell to 1.20573 overnight lows against the loonie following the Bank of China’s monetary policy statement. The Bank of Canada has maintained the status quo with its key interest rate and quantitative easing program. As a result, the USD / CAD pair bounced to an overnight high of 1.2117 before setting. The nearest resistance is located at 1.2120, then at 1.2150 and 1.2180. The nearest support is at 1.2080 and 1.2055. With USD / CAD still near recent lows and overly extended long speculative positions in the CAD market, the only direction is north. Look for buying opportunities today on dips in the probable range of 1.2075-1.2175.
For today, tin helmets may be big. Happy trading and everyone on Thursday.