North American Summary and Highlights 14 July
Overview - The USD slipped on a softer than expected US CPI, though corrected off its lows.
North American session
The USD fell sharply on a much softer than expected June CPI, -0.4% overall and unchanged ex food and energy, though retraced a significant proportion of the losses in subsequent trade. USD/JPY, after slipping to 161.75 from around 162.20 largely erased its losses. AUD/USD and USD/CAD however largely sustained their reactions to the data, if respectively supported by 1.l405 and resisted by 0.70. EUR/USD bounced above 1.1450 from near 1.14 before settling in mid-range.
Fed’s Warsh did not give much away on policy at his testimony but stated the CPI did not mean mission was accomplished on inflation. Trump eased Middle East concerns by backing away from plans to change a 20% toll on the Strait of Hormuz, looking to trade and investment deals with the Gulf states.
European session
As the market increasingly resigns itself to the risks that abnormal Strait scenarios become messier and more entrenched after recent comments and events, oil has marked higher, Brent making it to the $86s, up another $3. There is also increasing focus on much greater pressure on refined.
In FX, this is still largely proving self-neutralising to a degree, in places, with EUR/USD still sat around 1.14, where more options sit again into US CPI. Both ECB and Fed have moved back to pricing in 2 hikes by turn of the year. The market is also already somewhat long dollar against most pairs.
NZD has been the main independent mover for a few sessions now. The short squeeze extends further with NZD/USD up around 1% now on the day, following the overnight comments that added further fuel. Otherwise, the likes of NOK and CAD are seeing a degree of support from the oil lift.