US CPI Data to Release at 12:30 EST

Key Movers

As expected, the Bank of Canada raised overnight rates 25bps and now at 1.5%, which is a ten year high. Press conference was constructive and the central bank kept the option open for further tightening in the future. At this time, market is pricing in a 68% chance for an October rate hike before year end. Statements from the BoC also highlighted the decreased concerns about housing and trade and revised its shorter growth forecasts. Policymakers noted that economy is operating close to capacity. The Loonie slid yesterday, but mainly due to oil prices dropping about $3 in the afternoon.


EUR has fallen overnight. The latest ECB Monetary Policy Meeting Accounts is the big event for the currency today and the main highlights were the following, rate guidance will be balanced between precision and flexibility; interest rates to hold, as long as needed, in order to raise inflation towards target; End of QE is conditional on incoming data due to uncertainty; Policymakers were in unanimous support of policy proposals.
German CPI in June printed as expected at 0.1% m/m and 2.1% y/y. Eurozone Industrial Production in May was also generally inline printing at 1.3% m/m and 2.4% y/y.


Sterling remains subdued this morning as England’s departure from the world cup and Brexit uncertainty weigh on the pound. The government is due to release its white paper on its proposed future trading relationship with the EU later today with reaction from the other side of The Channel likely to be a driver of sterling once the details have been digested by EU chief negotiator, Michel Barnier and co. The publication later today may see some market movement, however the reaction from the EU will be the true litmus test of the revised plan. Donald Trump is due to arrive in the UK later today on his first official visit to these shores since becoming President. His first stop off on his European trip riled Nato members yesterday as he criticised members of the bloc for their lack of defence spending. Expect Brexit rhetoric and comments on trade from the President to make headlines and hit risk assets throughout the rest of the week. GBP is lower this morning. Bank of England Governor, Mark Carney is due to speak later today, however he may keep his cards close to his chest re: possible rate hike given next week’s wage, inflation and retail sales data from the UK. Should this trio of prints hit target, then an August rate hike may become fully priced in by markets to the pound’s benefit.


The global sell off in equities has hit the Aussie hard this week however a calming of nerves over Trump/China has seen a small bounce for the local dollar. There are no more headline making data-prints from Down Under this week so Trump comments and possible reactionary measures from China over trade will drive commodity currencies direction.


Tonight sees the Business NZ Manufacturing Index released with holders of the kiwi hoping for an uptick from last month’s solid but unspectacular 54.5. China Trade balance figures will likely move the local unit more as well as the aforementioned Trump/China tensions.