Forex Today: Kiwi – a big mover in Asia; focus on UK data, Powell’s testimony
Cautious optimism was the underlying theme in Wednesday’s Asian trading leading into Fed Chair Powell's testimony, with a broadly firmer US dollar underpinned by higher Treasury yields amid improved risk tones. Meanwhile, markets weighed in the ongoing US-China trade talks and escalating Japan-South Korea trade tensions.
Among the Asia-pac currencies, the USD/JPY pair refreshed six-week tops at 109.00 in early trades and consolidated the recent gains near 108.90 levels almost throughout the session. The Aussie fell to fresh three-week lows of 0.6918 on disappointing Chinese inflation figures while Kiwi emerged the weakest and slipped to multi-week lows of 0.6558 after stops got triggered below a break of the 0.6600 level. However, the spot managed to recover to the 0.66 handle amid a rally in oil prices and moderate risk-on. On the European currencies-side, EUR/USD clung to 1.12 handle amid ECB QE hopes and weak fundamentals while the Cable stalled its tepid recovery and fell back to mid-1.2400s amid looming Brexit and UK growth concerns.
Main Topics in Asia
Trade wars: Taiwan only a pawn - The Global Times
US-China officials conducted a call on trade talks, exchanged views on G20 meeting outcome
June Chinese CPI arrives in line with expectations at 2.7% Y/Y
Gold technical analysis: Bears eye the 50% Fibo retracement
China's Xi made no promises to buy US farm products at G20 - SCMP
China’s Foreign Ministry urges US to "immediately cancel" the proposed arms sale to Taiwan
WTI technical analysis: Oil flirts with 50% Fib retracement level
S. Korean Pres. Moon: Preparing countermeasures to Japan export curbs
Asian stocks pick up a bid ahead of Powell’s testimony
Turkey’s Pres. Erdogan: If central bank is not completely revised, serious problems could be faced - Haberturk
Bitcoin closes In On the YTD Highs
Key Focus Ahead
Markets eagerly await Fed Chair Powell’s testimony on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC; due later today at 1400 GMT. It’s likely to be the main event risk for today, as markets will pay close attention to his remarks on the Fed’s interest rates and economic outlook for fresh dollar trades. Its widely expected that Fed is likely to cut rates by 25 bps at the July 30th-31st meeting following upbeat US payrolls data.
Also, in focus remains the Bank of Canada (BOC) interest rate decision, with a status-quo expected, as the economy stands resilient to the global growth slowdown. The rate statement will be out at 1400 GMT, shortly followed by Governor Poloz’ press conference. Later in the American mid-morning, at 1800 GMT, the FOMC will publish its June meeting’s minutes, which once again help gauge the Fed’s interest rates outlook.
On the data front, the immediate focus remains on the UK monthly GDP, trade balance, industrial and manufacturing production data, all of which will drop in at 0830 GMT. From the Eurozone and US docket, there is no relevant macro news and hence, the speeches by Fed official Bullard and BOE MPC member Tenreyro will be closely eyed. For oil traders, the crude stocks data from the Energy Information Administration (EIA) will be reported at 1430 GMT.
EUR/USD logs three-day losing streak, focus on Powell’s testimony and Fed minutes
EUR/USD drops for three straight sessions on broad-based USD rally. Deeper losses could be seen if Fed’s Powell sounds less dovish-than-expected. EUR/USD, however, will likely regain poise if Powell reinforces rate cuts expectations.
GBP/USD: Bears taking back charge ahead of UK data, Powell
Sellers returned in the Asian trades, sending GBP/USD back to the midpoint of the 1.24 handle, having failed several recovery attempts near 1.2475 region. The Cable looks vulnerable and risks a break below 1.2400 should Fed Chair Powell hint at a smaller rate cut this month.
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