North American Summary and Highlights 31 July
Overview - The BoJ rate hike lifted the JPY in Europe. The reaction to the FOMC was modest, though Powell seeing a September easing as on the cards, if not decided upon, saw the USD edge a little lower.
North American session
The USD made modest early gains after weaker than expected gains of 122k in July’s ADP employment report and 0.9% in Q2’s Employment Cost Index, though USD/JPY moves below 150 were not sustained. EUR/USD advanced to near 1.0850 before reversing back to near 1.08. AUD/USD made more sustained gains, erasing its post-CPI losses. USD/CAD saw lows below 1.38 assisted by a stronger than expected 0.2% rise in May Canadian GDP but could not hold below the figure. June US pending home sales, with a 4.8% bounce, were stronger than expected.
The FOMC left rates unchanged as expected. The statement got a very limited reaction but the USD edged marginally higher with the FOMC still needing greater confidence on inflation moving sustainably toward target before easing. However at the press conference Chairman Powell stated that a September rate cut cold be on the table, though no decision had been taken. This saw the USD edge modestly lower, reaching fresh highs for the day versus GBP and AUD. USD/JPY moved back below 150 if not quite reaching fresh lows. EUR/USD remained below 1.1850 while EUR/CHF slipped to touch .95, USD/CAD settled near 1.38, slightly above the day’s low.
European morning session
USD/JPY dominated the European morning session, falling 250 pips from opening levels following the larger than expected BoJ rate hike. The JPY had surged briefly after the rate hike, but subsequently reversed gains in a sell on the news move, so that USD/JPY opened the European session close to the level seen before the BoJ meeting. But the JPY surged higher helped by the Ueda press conference in which he indicated further rate hikes were likely if data came out in line with BoJ expectations.
There wasn’t a great deal of FX action elsewhere, with EUR/USD recovering from an initial dip helped by slightly stronger than expected Eurozone CPI data, which came in 0.1% above expectations at 2.6% headline, 2.9% core. Otherwise, we also saw German unemployment data which was in line with expectations at 6.0% with an 18k rise on the month.