North American Summary and Highlights 31 Jul
Overview - JPY weakness after the BoJ meeting was the story of the day though the USD was marginally firmer elsewhere.
North American session
The USD advanced though strongly so only in the case of USD/JPY, breaking above 150 to reach 150.75. EUR/USD near 1.1420 and GBP near 1.3215 were slightly weaker as were the commodity currencies.
US data showed initial claims lower than expected if up by 1k to 218k, while the Q2 employment cost index at 0.9% was stronger than expected. Gains of 0.3% in June personal income, spending and core PCE prices confirmed Q2 data seen in the GDP report. May Canadian GDP fell by 0.1% as expected but the preliminary estimate for June was for a 0.1% increase. Trump extended the tariff deadline for Mexico for 90 days.
European morning session
The USD gained strongly through the European morning, particularly against the JPY. USD/JPY rise a big figure to 149.85, while EUR/USD was only marginally softer at 1.1435. AUD/USD also fell significantly, dropping to 0.6450 from an open near 0.6470, and GBP/USD fell 30 pips to 1.3235. USD/CHF and EUR/CHF both edged a little higher, as did EUR/NOK, but EUR/SEK was little changed.
JPY weakness looks to have been related to Ueda’s post BoJ meeting press conference. Although Ueda still indicated a desire to raise rates eventually, his comments suggested no rate hike would come much before the end of the year, as he didn’t expect real wages to pick up much before then. However, Japanese yields were not much changed, and the JPY move looks a little aggressive given the lack of movement in yield spreads and a slightly softer equity tone, although the new highs seen overnight in S&P 500 futures likely also contributed to JPY weakness. The EUR got some support from slightly stronger than expected preliminary July CPI data from France, Italy and Germany, with German unemployment also rising slightly less than expected.