North American Summary and Highlights 17 July

North American session

EUR/USD and USD/JPY saw little movement in North America and USD European losses were sustained, the former near 1.0940 and the latter getting close to 156. GBP/USD slipped to near 1.30 from 1.3040 as EUR/GBP erased European losses. EUR/CHF however continued to weaken, to .9665. With equites softer the commodity currencies came under some pressure, CAD in particular with USD/CAD briefly reaching 1.37.

US data was on the firm side of expectations with housing starts and permits both increasing, though the gains were fully due to the volatile multiples sector. A 0.6% rise in industrial production, with manufacturing up by 0.4%, was more convincing. Fed comments from Williams, Waller and Barkin however sustained hopes that easing might start in September and the Fed’s Beige Book was slightly softer than its May release.

European morning session

The USD lost ground across the board in Europe in reaction to an interview between Donald Trump and Bloomberg where he complained about a strong USD hurting US competitiveness and a weak Yen and Yuan.  The main beneficiary has been the JPY, which has gained ground across the board given the scale of JPY shorts.  However, it has also made USD sentiment somewhat more defensive, as the previous view had been that a Trump presidency would likely be USD bullish – higher inflation and higher for longer rates.  With Vance also favouring trade action and a lower USD, traders are now less certain whether a Trump presidency is USD bullish or bearish.  

Elsewhere, UK June CPI was the main item on the calendar on Wednesday. Though the number was broadly as expected, service inflation did not fall and this has cooled August BOE rate bets and helped the pound on a cross rate basis.