The Greenback took hits across the board as markets prepared ahead of Janet Yellen’s testimony. Meanwhile, the Aussie rocketed on the back of higher iron ore prices.
- Japan’s PPI (y/y) retains 2.1% growth as expected in June
- Japan’s tertiary industry activity slips by 0.1% vs. 0.5% decline expected, 1.4% growth previous
- AU Westpac consumer sentiment up by 0.4% vs. 1.8% decline in June
Dollar takes a one-two punch
The Greenback continued to take hits across the board as Asian market players pared some of their dollar holdings ahead of Yellen’s testimony scheduled today.
Recall that analysts had been expecting hawkish remarks from the Fed head honcho after the latest policy statement revealed no changes to the members’ willingness to raise rates by another 25 basis points this year.
But, as mentioned in the U.S. session recap, other FOMC members weren’t hawkish enough to suit the markets. Read the update to see what members Brainard, Kashkari, Mester, and Harker said yesterday!
It also didn’t help the dollar’s cause that Donald Trump’s eldest son is being accused of violating the law by agreeing to meet a Russian-associated prosecutor to discuss dirt on Hillary. The news weighed on U.S. markets though they eventually recovered before the closing bell.
Fortunately, these updates were tempered by U.S. Senate Republican leader Mitch McConnel announcing a two-week delay in the Senate’s August recess.
Markets took this to mean that the senators could approve of an Obamacare repeal plan as well as approve some appointments before the break, which is good for the Trump administration’s programs.
Asian central bank moves
Traders may be waiting for Yellen’s testimony, but that didn’t stop the PBoC and the BOJ from making their own headlines!
Earlier today the People’s Bank of China (PBoC) reportedly injected 70B RMB into the banking system after suspending their reverse repurchase agreements operations for a week. This opposed concerns that the central bank is thinking of tightening and pushed Chinese stocks higher.
Meanwhile the Bank of Japan (BOJ) bought more bonds today. While its purchase of 3 to 5-year Japanese government bonds is on schedule, the increase from 300B JPY to 330B JPY isn’t.
The move came almost a week after the central bank promised to buy unlimited 10-year JGBs to keep its yield low in accordance to their Yield Curve Control program.
Major Market Mover(s):
The low-yielding Greenback suffered a bit more against its counterparts as market players prepare for Janet Yellen’s testimony due today.
USD/JPY led the losses with a 44-pip drop (-0.39%) to 113.38 but EUR/USD is also up by 17 pips (+0.15%) to 1.1480, and GBP/USD is up by 5 pips (+0.04%) to 1.2852.
The dollar’s losses weighed which heavily on USD/JPY also made itself felt in other yen crosses.
EUR/JPY dropped by 33 pips (+0.25%) to 130.16, GBP/JPY is down by 52 pips (-0.36%) to 145.71, and CAD/JPY is down by 19 pips (-0.22%) to 87.88.
Import prices of iron ore 63% Fe content gained a whopping 1.2% to trade at $64.70 per dry metric tonne today, thanks to Shanghai rebar futures – the world’s most traded steel contract – jumping to the highest level since end-2013.
Naturally, this pushed the commodity-related dollar higher across the board.
AUD/USD is up by 23 pips (+0.30%) to .7655, AUD/JPY limited its losses to 9 pips (-0.10%), and AUD/NZD gained 11 pips (+0.10%) to 1.0572.
Even EUR/AUD fell by 23 pips (-0.15%) to 1.4998 while GBP/AUD dipped by 45 pips (-0.27%) to 1.6790.
Watch Out For:
- 6:00 am GMT: German wholesale price index (0.2% expected, -0.7% previous)
- 8:30 am GMT: U.K.’s jobs reports (read Forex Gump’s trading guide!)
- 9:00 am GMT: Euro Zone industrial production (1.0% expected, 0.5% previous)