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Commodity currencies continued to lag behind their forex peers for the most part of the session while the U.S. dollar took the lead later in the day.

U.S. CPI data came in mostly in line with expectations, but the focus seems to have been on the Trump-Kim meeting and Brexit debates, with the pound getting a sharp boost from the “meaningful vote.”

  • U.S. NFIB Small Business Index up from 104.8 to 107.8 vs. 105.2 forecast
  • U.S. headline CPI posted another 0.2% uptick as expected
  • U.S. core CPI up by 0.2% vs. 0.1% forecast, 0.1% previous
  • U.S. federal budget deficit narrowed from $214.3B to $146.8B
  • PM May wins Brexit vote at 324-298
  • Trump and Kim agreed to work toward denuclearization of Korea
  • Trump conceded to stop “provocative” military exercises near Pyongyang
  • New Zealand food price index posted flat reading in May

Major Events/Reports:

“Meaningful vote” on Brexit

The much-anticipated showdown in the U.K. House of Commons went by with a lot of drama but eventually yielded a 324-298 “meaningful vote” in favor of PM May’s plans with some concessions.

Some highlights from the debates include Brexit junior minister Philip Lee throwing in the towel, speculations of a second EU referendum, and Tory rebels led by Dominic Grieve claiming that they planned on voting with the government in the first place.

According to the Brexit department’s spokesperson:

“The Brexit Secretary has set out three tests that any new amendment has to meet – not undermining the negotiations, not changing the constitutional role of parliament and government in negotiating international treaties, and respecting the referendum result.”

He clarified that the government does not agree to having the MPs have the final say in negotiations. Instead, the government agreed to give Parliament the power to decide what happens if the final Brexit deal is rejected.

PM May and her peers gave in to the amendment that the U.K. can replicate EU law after the official Brexit date and continue to participate in the bloc’s agencies. It is also mulling over an amendment to report on steps taken to negotiate a customs union by October 31.

Keep in mind, however, that the bill will return to the House of Lords and that ministers could still come up with fresh amendments next week.

Trump-Kim statements

A lot of the media attention was focused on the historic sit-down between U.S. President Trump and North Korean leader Kim Jong-Un, two government heads that had been strongly at odds with each other.

In their joint statement after the talks, both leaders agreed to work toward the denuclearization of the Korean Peninsula but stopped short of providing specifics. Trump also promised to “provide security guarantees” to North Korea while Kim “reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.”

What took most people by surprise was that Trump also promised to put an end to “very provocative” military exercises in the area – something that officials in the Pentagon and its ally South Korea didn’t see coming. Trump tweeted:

Return of risk aversion?

U.S. equities ended mixed for the day as most investors were able to breathe easy after the Trump-Kim announcements while others might be holding out for the FOMC decision.

  • Dow 30 index is down 1.58 points to 25,320.73 (-0.01%)
  • S&P 500 index is up 4.85 points to 2,786.85 (+0.17%)
  • Nasdaq is up 43.87 points to 7,703.79 (+0.57%)

Commodities carried on with their slide from the previous session but at a slower pace.

  • Gold is down $4.80 to $1295.73 per troy ounce (-0.37%)
  • WTI crude oil dipped $0.06 to $66.04 per barrel (-0.09%)

U.S. bond yields were higher as the Fed is widely expected to announce a 0.25% rate hike.

  • U.S. 5-year yield is up to 2.809% (+0.04%)
  • U.S. 10-year yield is up to 2.961% (+0.13%)
  • U.S. 30-year yield is up to 3.093% (+0.02%)

Major Market Mover(s):

GBP

Sterling was already off to a pretty good start before retreating slightly when debates were heating up. At the end of it all, pound pairs shot sharply higher when the “meaningful vote” was made.

GBP/USD popped up from 1.3351 to a high of 1.3425, GBP/JPY jumped to a high of 147.98, EUR/GBP slumped to a low of .8770, and GBP/CHF ticked up to a high of 1.3212.

USD

The Greenback edged higher as the session rolled along, likely kept supported by healthy CPI data and positive FOMC expectations.

EUR/USD inched down from 1.1794 to a low of 1.1736, USD/JPY advanced from 110.13 to a high of 110.55, USD/CHF is up to .9872, and AUD/USD is down to .7573.

Comdolls

The comdoll gang stayed in the red for the rest of the day, with the Aussie suffering the brunt of the losses.

AUD/JPY slid from 84.00 to a low of 83.53, EUR/AUD recovered to 1.5517, GBP/AUD is up to 1.7659, and AUD/CAD slipped to .9856.

The Loonie also took some hits from weaker crude oil prices and persistent NAFTA jitters, although trade tensions took the backseat when the Trump-Kim summit took center stage.

USD/CAD is up from 1.2999 to a high of 1.3030, CAD/JPY slipped to 84.89, GBP/CAD advanced to a high of 1.7442, and NZD/CAD is holding steady around .9120.

Watch Out For:

  • 12:30 am GMT: Australia’s Westpac consumer sentiment (-0.6% previous)
  • 2:00 am GMT: RBA Governor Lowe will testify