North American Summary and Highlights 30 Jul
Overview - The USD advanced on strong US data and a hawkish tone from Fed’s Powell.
North American session
The USD advanced early in the session with the support of stronger than expected US data, firstly a 104k rise in July’s ADP employment report and then a 3.0% gain in Q2 GDP, with core PCE prices also stronger than expected at 2.5%. EUR/USD fell below 1.15 and USD/JPY touched above 149. There was not much reaction to the Bank of Canada decision to leave rates unchanged at 2.75%.
The FOMC also left rates unchanged as expected, at 4.25-4.5%, though Waller and Bowman dissented for easing, and the statement saw economic growth as having moderated in the first of the year, thus downplaying the strength of Q2 GDP which followed a negative Q1. The USD response was limited, with a marginal dip erased before Powell’s press conference started. Powell’s press conference, particularly a cautious tone on the inflationary risks from tariffs, helped the USD to fresh highs, EUR/USD below 1.1420 and USD/JPY above 149.40, despite Powell saying no decision had been made for the next meeting scheduled in September. USD/CAD extended gains well above 1.38 while AUD/CAD fell below .89.
European morning session
The USD was little changed through the European morning. The EUR initially gained a boost from stronger than expected French GDP and German retail sales data, but slipped back to opening levels when Italian GDP came out below consensus and German GDP was down on the quarter as expected. Even so, Q2 Eurozone GDP was slightly better than expected at +0.1% q/q. USD/JPY also stayed steady near 148, while the USD made some ground against the AUD, which dipped 15 pips to trade below 0.65, and the CAD with USD/CAD up 10 pips to 1.3780.
GBP was the strongest currency on the session, with EUR/GBP continuing to decline, dropping 15 pips to 0.8635. EUR/CHF was also 5 pips lower at 0.93. The European Commission monthly confidence survey was a little more upbeat than expected, with industrial confidence rising and the business climate index up slightly on the month, but the survey still looks downbeat on any longer term reading.