Entering into US session, Euro is trading as the strongest one for today, followed by Sterling. On the other hand, Yen is the weakest, followed by Kiwi.
Euro’s strength can be attributed to the unexpected acceleration both headline and core inflation in July. CPI rose 2.1% yoy, up from 2.0% yoy and beat expectation of 2.0% yoy. Core CPI rose 1.1% yoy, up from 0.9% yoy and beat expectation of 1.0% yoy. This is more than enough to offset the impact of slower than expected GDP growth of 0.3% qoq in Q2 was ignored.
ECB is clear with its path for stopping the asset purchase program. And it’s clear with the forward guidance of keeping interest rates unchanged through summer of 2019. The language, though, is intentionally kept ambiguous as ECB wanted to strike the balance between precision and flexibility. While a month of inflation data won’t trigger ECB to pull ahead the first hike, it certainly reduces the chance of delaying it.
Yen, on the other hand, was pressured by the dovish message of BoJ. No matter how the yield curve control framework is tweaked, BoJ Governor Haruhiko Kuroda is rather concrete in his press conference. He pointed to market speculations that BoJ could have an earlier than expected stimulus exit. And the changes target to “dispel such speculation”. Also, Kuroda conceded that BoJ won’t be able to meet the 2% inflation target within the forecast time frame. 10 year JGB yield was also sent down to 0.048, less than half of day high at 0.115.
More on BoJ:
In other markets, Asian stocks were mixed, with Nikkei reversing earlier losses to close up 0.04%. China Shanghai SSE closed up 0.26%. Singapore Strait Times closed up 0.38%. But Hong Kong HSI closed down -0.52%. Nikkei has managed to stay above nearly flat 55 day EMA with the current retreat. Near term outlook is maintained bullish for extending the rise from 20347.49 at a later stage.
European stocks are mixed so far, with FTSE up 0.58%, DAX down -0.04% and CAC up 0.08%. WTI crude oil is back below 70 but there is no serious selloff. Gold edges lower but is still having one hand on 1220 handle.
Dollar regains ground after Chicago PMI and consumer confidence
Dollar regains some ground after better than expected consumer confidence reading.
US Conference Board consumer confidence rose to 127.4 in July, up from 127.1 and beat expectation of 126.5. Lynn Franco, Director of Economic Indicators at The Conference Board said in the release that “Consumers’ assessment of present-day conditions improved, suggesting that economic growth is still strong. However, while expectations continue to reflect optimism in the short-term economic outlook, back-to-back declines suggest consumers do not foresee growth accelerating.”
Full release here.
Chicago PMI rose to 65.5 in July, up from 64.1 and beat expectation of 61.8. Jamie Satchi, Economist at MNI Indicators said in the release that “the MNI Chicago Business Barometer started the third quarter in bullish form, with business activity supported by robust demand and output. Both, like the headline index, registered 6-month highs and the majority of firms expect demand to increase further over Q3.” However, “input prices continue to be a thorn in the side of businesses, however, with the Prices Paid indicator at the highest in a decade and continuing to signal pipeline inflation.”
Full release here.