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FED Chair Powell and Trump to Direct the Dollar Through the Day

Bob Mason
Market risk appetite returns through the morning, with policy divergence continuing to favor the U.S Dollar. Direction for the majors will be hinged on noise from the Oval Office and Central Bank member commentary through the day.

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, limited to 2nd quarter consumer sentiment and 1st quarter current account numbers out of New Zealand. Outside of the stats, the BoJ’s May policy meeting minutes were also released, with the 1-month lag leaving the minutes relatively flat from a Yen perspective.

For the Kiwi Dollar, the 2nd quarter Westpac Consumer Sentiment Index eased from 111.2 to 108.6, falling below the long-run average.

  • The present conditions index rose by 0.5 points to 111.7, while the expected conditions index fell by 4.6 points to 106.6.
  • A net 16.9% of those surveyed were upbeat about the economic outlook over the next 5-years, down from 17.9%.
  • A net 1.2% saw the economy improving in the year ahead, down from 11.7%.
  • While sentiment towards the economy eased, the number of households seeing it as a good time to buy a major household item rose above the long-run average to 26.2%, up by 3.2 points from the 1st

The shift in sentiment was attributed to the housing market, with the NZ government having introduced measures to cool price growth, rising fuel prices also hitting households.

The Kiwi Dollar moved from $0.68996 to $0.68913 upon release of the figures, released prior to the 1st quarter current account numbers.

New Zealand’s current account deficit widened from NZ$7.72bn to NZ$7.91bn in the 1st quarter, year-on-year, which was better than a forecasted widening to NZ$8.07bn, with the 1st quarter NZ$ $2.77bn deficit recovering to a NZ$0.18bn surplus, quarter-on-quarter.

The Kiwi Dollar moved from $0.69044 to $0.69045 upon release of the figures, before easing to $0.6904 at the time of writing, up 0.04% for the morning.

Elsewhere, the Japanese Yen was down 0.08% to ¥110.15 against the Dollar, while the Aussie Dollar was up 0.20% to $0.7396, market panic over a possible trade war easing through the morning, supporting a pickup in risk appetite through the Asian session.

In the equity markets, the Nikkei and ASX200 closed out the day with solid gains, the pair up 1.24% and 1.15% respectively, with the Hang Seng and CSI300 up 1.03% and 0.5% respectively at the time of writing, the pair having some way to go before recovering Tuesday’s losses.

The Day Ahead:

For the EUR, key stats scheduled for release through the day were limited to Germany’s producer price index figures for May, which came in better than a forecasted 0.4%, wholesale price rising by 0.5% to keep pace with April’s rate of inflation, according to figures released by Destatis.

  • Year-on-year, producer prices for industrial products rose by 2.7%, the annual rate picking up from April’s 2.0%.
  • Prices across all main industrial groups increased, with energy prices rising by 5.5%, attributed to a 12.5% jump in prices of petroleum products and an 8% rise in electricity prices.
  • Prices for intermediate goods rose by 2.6%, with durable consumer goods prices rising by 1.6%.
  • Prices for capital goods rose by 1.2%, while prices for non-durable consumer goods rose by 0.8%.
  • The core producer price index rose by 1.7% in May, compared with a 0.2% rise in April.

The EUR moved from $1.15728 to $1.15693 upon release of the figures, a pickup in the rate of wholesale price inflation unlikely to have a material impact on sentiment towards ECB monetary policy, with economic indicators continuing to suggest tempered growth in the 2nd quarter. At the time of writing, the EUR was down 0.16% to $1.1572, with Draghi and a number of other ECB members scheduled to speak through the day to provide further direction.

For the Pound, economic data scheduled for release is limited to June’s CBI Industrial Trend Orders, which are forecasted to be a positive for the Pound, though direction through the day will be hinged on sentiment towards tomorrow’s BoE policy decision and more importantly the vote count that would influence the market’s outlook towards policy through the remainder of the year.

At the time of writing, the Pound was down 0.16% to $1.3153, with Brexit woes weighing through the week, British Prime Minister May having lost another vote on Brexit legislation in the House of Lords.

Across the Pond, key stats are limited to 1st quarter current account figures and May’s existing home sales numbers, with the stats skewed to a positive Dollar, though with FED Chair Powell scheduled to speak in the early afternoon and noise from the Oval Office on trade to consider, the stats are unlikely to have a material impact.

At the time of writing, the Dollar Spot Index was up 0.12% to 95.127, supported by a pullback in the Japanese Yen and a softer EUR, with a weaker Pound adding further support through the morning.

Across the border, the Loonie was up just 0.02% to C$1.3284, with the Loonie struggling in spite of U.S – China trade war jitters easing, NAFTA in focus.

This article was originally posted on FX Empire