North American Summary and Highlights 20 June
Overview - CHF and GBP slipped after the SNB and BoE decisions but NOK advanced after the Norges Bank decision. Despite mostly softer than expected US data, the USD was generally stronger.
North American session
The BoE left rates unchanged as expected with a 7-2 vote, but the markets saw the statement as dovish boosting the probability of an August rate cut, with higher than expected service inflation seen as respecting factors that would not push up medium term inflation. EUR/GBP bounced above .8450 while GBP/USD slipped below 1.27, later extending to 1.2660 as the USD advanced broadly.
US data was softer than expected with initial claims seeing only a modest correction from last week’s sharp rise, housing starts and permits falling, the Philly Fed less positive and the current account deficit wider. However the USD dip on the data was brief as UST yields picked up, perhaps noting stronger price indices within the Philly Fed breakdown. USD/JPY led the way advancing to 158.90 while EUR/USD fell to near 1.07. AUD/USD however fell only marginally and USD/CAD fell below 1.37.
European morning session
The CHF fell back and the NOK gained through the European morning after the SNB cut the policy rate 25bps and Norges Bank left rates unchanged. EUR/CHF gained around 0.5% to 0.9540 while EUR/NOK lost around 0.5% to 11.30. The CHF weakness was helped by comments from the SNB’s Jordan indicating a willingness to intervene in the FX market and forecasts that suggested a strong chance of a further rate cut in September. NOK gains reflected a higher projected rate path n the Norges Bank monetary policy report, although this had to some extent been anticipated after recent more hawkish comments.
Otherwise the USD was generally firmer, with EUR/USD 20 pips lower to 1.0720 and USD/JPY 30 pips higher to a high of 158.48, its highest since the first round of BoJ intervention on April 29, but AUD/USD and USD/CAD were little changed.