The dollar gained against the yen ahead of the US session, supported by encouraging data releases, and continued strengthening as Federal Reserve Chair Janet Yellen started her second-day testimony to Congress. The dollar index, a broad measure of the greenback’s strength, was up 0.07% towards the end of the European session.
The number of people seeking unemployment benefits fell last week, confirming labor market strength in the US. Initial claims for state unemployment benefits declined by 3,000 to 247,000 for the week ending July 8. This is below the upwardly revised number for the prior week (250K), but more than economists’ expectations (245K).
The Labor Department also released data for US producer prices in June that unexpectedly rose as sustained increases in the cost of services offset declining energy prices. PPI for final demand edged up 0.1% in June, month-on-month, after being unchanged in May. This may suggest that the pace of the inflation rate will pick up. Closely monitored US CPI data for June is set to be released tomorrow at 12:30 GMT.
Both data sets provided support to the dollar against the yen. Dollar/yen rose above the 113 handle during late European trading hours and continued strengthening as the US session started and Fed Chair Janet Yellen started her second day testimony to Congress.
The Australian and New Zealand dollars rose significantly during the European session, with the kiwi hitting a five-month high of $0.7368.
The euro was broadly flat against the greenback. Euro/dollar recovered above the 1.1400 handle as the Wall Street Journal reported that the European Central Bank would announce it plans to start tapering from next year, at its policy meeting in September.
Sterling was one of the better performing currencies against the dollar today. In the absence of significant economic data, one of the main drivers for pound traders was a hawkish speech by Bank of England policymaker Ian McCafferty. Pound/dollar gained 0.33% to last trade at 1.2928 as the European session was about to end.
The loonie has given up some of yesterday’s significant gains as the dollar was recovering during the day. Dollar/loonie rose to 1.2758.
Both closely watched commodities, oil and gold rose during the European session. Despite pessimistic comments from the International Energy Agency, oil prices remained above the $45 level. IEA noted that global oil supply rose in June as compliance of production cuts was at the lowest level in six months. WTI was up on the day, last trading at $45.76 a barrel and Brent at $47.95.
Inversely related to the US currency, gold prices came under pressure as the US session was starting. The precious metal is broadly flat on the day, last trading at $1,218.58 an ounce.
