In terms of economic releases, UK inflation numbers were by far the most important release during today’s European session. The downside miss hurt sterling which posted a ten-month high versus the dollar earlier in the session. In other news, the currency markets were once again anything but deaf to political developments, pushing the dollar to new lows on the seeming inability by the Trump administration to repeal and replace Obamacare.
The dollar index, a broader gauge of the US currency’s strength, experienced considerable losses today. The measure was last down by nearly 0.7%, touching a more than ten-month low of 94.48. Excluding the British pound, the greenback was down against all currencies that constitute the dollar index. Market participants are interpreting the latest fallback on the repeal of Obamacare (as two more Republican senators said they will oppose the current Republican bill) as indicating that future efforts by the Trump administration to promote pro-growth policies will also fail to materialize. Dollar/yen reached a two-week low of 111.76 in today’s trading, while it was down 0.6% during afternoon European trading hours.
Regarding data out of the US, June import prices fell by 0.2% as expected. The respective figure for exports showed an identical percentage decline, though expectations were for it to remain flat. The dollar did not notably move relative to other majors within the initial minutes of data release.
Out of the UK, June inflation data fell short of expectations, pushing the pound lower as markets believe the numbers lower the odds for a rate hike during next month’s Bank of England policy meeting. Specifically, the inflation rate came in at 2.6% on an annual basis in June, below forecasts and last month’s 2.9%. Month-on-month, inflation experienced zero growth, below the 0.2% that was expected and May’s respective rate at 0.3%. Core inflation, which excludes volatile energy and food products, fell to 2.4% year-on-year from 2.6% in the preceding month. Pound/dollar traded 0.3% down on the day in afternoon European trading hours. Earlier in the day and before inflation figures went public, sterling was advancing relative to the greenback, posting a ten-month high of $1.3125. In the meantime, euro/pound was last up by a sizable 1.1%, eyeing the 0.89 handle.
The monthly German ZEW survey, gauging investor morale for the month of July in Europe’s largest economy, negatively surprised today. In particular, the index measuring economic sentiment fell to 17.5 from 18.6 during the prior month. Expectations were for a reading of 18.0. In addition, the measure gauging investors’ perceptions of the economy’s current condition declined to 86.4 from June’s 88.0 which also coincided with analysts’ forecasts. The deterioration in sentiment was attributed to the appreciating euro, something which is not favored by German exporters as their products appear less attractive to foreign buyers. Despite the fall, the German economy is expected to grow solidly throughout the rest of the year, remaining resilient to global threats. Euro/dollar didn’t react much upon immediate release of the data.
Euro/dollar posted significant gains today, rising to a fourteen-and-a-half-month high of 1.1582. The pair was last challenging that high for a potential close further up on the day. The European Central Bank will be holding a policy meeting on Thursday.
Today’s bi-weekly dairy auction, which tends to affect the kiwi as New Zealand is a major dairy exporter, showed prices increasing by 0.2% relative to two weeks ago. The New Zealand dollar didn’t react much to the data relative to its US counterpart. Kiwi/dollar was last up 0.5%, recovering from losses earlier in the day after softer than expected inflation figures out of New Zealand.
Diverting from forex markets to commodities, WTI and Brent crude were last trading at $46.49 and $48.96 a barrel, up 1.0% and 1.1% on the day respectively. Gold, which benefitted from dollar weakness, last traded close to the two-week high of $1242.40 an ounce hit today.
