USD
The dollar spent Wednesday morning treading water, with the pinned just below 100 ahead of July’s CPI report. The print, landing early yesterday afternoon, showed a headline price increase of just 0.1% MoM as base effects saw the annual rate ease to 3.4% from 3.5%, while core rose 0.2% MoM and 2.5% YoY. As we noted yesterday, an in-line outcome should keep the Fed on hold in September, and markets have duly trimmed the odds of a hike from close to a coin toss pre-release to around 35% as of writing this morning. Even so, the greenback whipsawed around the release to finish the day marginally firmer, with safe-haven demand underpinned by Middle East concerns. Iran continues to hold the Strait of Hormuz shut, demanding war reparations and sanctions relief, while a Houthi strike in the Bab el-Mandeb further dented reopening hopes, keeping near $90 and around 4.70%. Today brings July PPI, expected at 0.2% MoM and 4.9% YoY, plus jobless claims. That is unlikely to alter yesterday’s sentiment much, keeping the dollar in limbo today.
EUR
The euro slipped marginally on Wednesday, despite softening US CPI, and seeing no domestic events of note. With hostilities in the Middle East ongoing and Oman-mediated talks reportedly at an advanced stage, but yet to deliver, external events remain in the driving seat. We continue to expect the to remain in the 1.15–1.16 range, absent a concrete US–Iran agreement that reopens the strait. That is true again today. The calendar is thin, with June eurozone industrial production at 10:00 BST top of the docket, and unlikely to rock the boat. In summer holiday-thinned liquidity, headline risk out of the Gulf and this afternoon’s US PPI report should instead set the tone.
GBP
Sterling spent much of Wednesday anchored near 1.35 and around 1.17 , before slipping against a firmer greenback post-CPI. The downtrend has extended this morning too, despite better-than-expected growth figures at 07:00 BST. According to these data, the economy grew 0.4% QoQ in Q2, while June GDP rose 0.3% MoM against expectations for a flat reading. Still, slowing household consumption growth, which slipped from 0.6% in Q1 to 0.3% in Q2, helps temper any hawkish monetary policy implications. Regardless, the resulting FX moves remain modest, albeit negative for the pound, with price action through the rest of the data likely to reflect external factors more than domestic fundamentals.
CAD
Wednesday’s session was quieter for after a busy start to the week, albeit with the pair ultimately rising back toward 1.40, in keeping with the broad greenback bid. The domestic calendar remains empty today, and the Bank of Canada does not meet again until next month. That should leave the currency to trade off this afternoon’s US PPI print, oil, and Middle East headlines. We would flag next week’s August 19th US tariff deadline as the key idiosyncratic risk to the loonie’s recent run.
This content was originally published by our partners at Monex Canada.
