Monex: Dovish Powell roept stijging dollar voorlopig halt toe

Monex: Dovish Powell roept stijging dollar voorlopig halt toe

Currency
Ima Sammani (Monex) - 980x600.jpg

Hieronder volgt een kort commentaar in het Engels van Ima Sammani, valuta analist bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.

USD
The US dollar sat at the bottom of the G10 pile yesterday after the currency was hit by comments from US Federal Reserve Chair Jerome Powell. In his semi-annual monetary policy report, Powell continued to cast a dovish tone and stated the central bank would deliver powerful support until the economic recovery is complete, while adding that inflation is expected to remain elevated in the upcoming months before easing and acting prematurely would be a mistake. Additionally, he mentioned that there is still a “long way to go” in the labour market recovery. His cautious comments halted the USD upside for now, with markets ignoring the stronger-than-expected Purchasing Price Index figures which came in around the same time as the release of Powell’s testimony text. PPI figures rose 0.1% MoM vs the 0.6% expected print, while year-on-year data showed a 7.3% increase vs the consensus of 6.7%. Markets have been taking strong data as a reason to buy US dollars since the Federal Reserve’s June meeting, as the individual Fed member projections in June indicated two rate hikes in 2023 as opposed to zero previously which sparked policy expectations. This wasn’t the case yesterday as the data was paired with dovish tones from Powell. Powell faces more questions from the Senate banking panel today at 15:30 CET.

 

EUR
EURUSD pared back losses throughout most of yesterday’s session, taking the pair back to mid-ranges seen over the week as a gauge of the dollar weakened. Domestically, May’s industrial production data from the EU was shrugged off by markets when the figure showed a contraction of 1% MoM, missing market expectations. The EU held a press conference yesterday to discuss the package of proposals to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% in 2030, compared to 1990 levels. While this had no short term currency impact, it will be relevant for what this means for investments in the EU and how the European Central Bank’s new climate goals relate to this. For the euro, the ECB will be in bigger focus after last week’s strategy and next week’s July meeting.

 

GBP
Sterling was one of the better performers against the US dollar yesterday as UK CPI inflation data printed above expectations, but retreated later in the afternoon after covid-related concerns undermined demand for the pound. This morning, the UK statistics office published its monthly employment figures which showed unemployment fell 68k to 1.64 million in the three months to May. With the prints being close to consensus, the impact for sterling was limited. The highlight of the day will be the speech from MPC member Michael Saunders entitled “the inflation outlook”. This will add colour to speeches from Cunliffe and Ramsden yesterday who both expect inflation to be transitory but sounded more alert given the higher CPI print seen yesterday. Saunders’ speech will be at 12:00 CET.