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The Greenback held on to its spot as the king of pips throughout the U.S. session, lifted by safe-haven demand and positive data. Traders are also likely pricing in upbeat expectations for the upcoming CPI release.

The BOC hiked interest rates by 0.25% as expected, but the Loonie’s gains were capped as crude oil took hits. Commodity currencies trailed behind, with the Aussie in last place.

  • U.S. headline PPI up by 0.3% vs. 0.2% expected in June, 0.5% previous
  • U.S. core PPI up by 0.3% vs. 0.2% expected in June, 0.3% previous
  • BOC hiked interest rates from 1.25% to 1.50% as expected
  • BOC: Rates would continue to rise at a gradual pace
  • BOC Gov Poloz: Economy in a good place, near capacity, strong labor market
  • Poloz: Trade uncertainties weighed on business sentiment
  • U.S. EIA crude oil inventories fell by 12.4M barrels vs. expected 4.1M draw
  • FOMC member Evans: Supports one or two more hikes this year
  • Evans: Fundamentals for U.S. economy are very strong

Major Events/Reports:

Mostly upbeat medium-tier U.S. data

As though the recent bump up in risk-off flows wasn’t enough to shore up the dollar, Uncle Sam printed upbeat medium-tier reports which were enough to get dollar traders hopeful for a CPI beat.

Headline producer prices for June showed another 0.3% gain versus the estimated 0.2% uptick while the core figure also beat expectations at 0.3% versus 0.2%.

Although the core PPI was lower than the previous month’s 0.5% gain, market watchers seemed confident that the pickup in producer inflation could trickle to the consumer sector soon. Besides, higher tariffs on China would also put upward pressure on raw materials and overall CPI down the line.

Wholesale inventories for May, on the other hand, were up 0.6% or slightly higher than the estimated 0.5% figure. This suggests that businesses are keeping a few more goods in stockpiles instead of depleting inventories to make room for higher production.

However, components of this report still revealed that sales at wholesalers rose by 2.5% in May, which is its largest gain since March 2011. This follows a strong 1.4% pickup in April as auto sales rebounded by 2.9% during the month.

FOMC member Evans now a hawk?

FOMC voting member Charles Evans seems ready to shed his dovish feathers and join the hawks as he expressed support for one or two more hikes this year.

Recall that Evans was one of the cautious members who voted against a hike in December last year, so his shift in stance is a pretty huge deal.

In an interview, he cited that the U.S. economy is so strong that consumers and businesses can live with higher interest rates. Evans pointed to fiscal policy measures from the Trump administration as one factor propping growth prospects up.

As for trade-related uncertainties, he said:

“There are definitely downside risks, but the strength of the economy is really pretty important at the moment. The fundamentals for the U.S. economy are very strong.”

Evans also acknowledged the pickup in price pressures but added that he prefers to see inflation expectations a tad higher.

BOC statement and presser

As widely expected and as hinted at by BOC Governor Poloz earlier on, the Canadian central bank delivered on a 0.25% rate hike from 1.25% to 1.50%.

According to their official statement, policymakers expect global growth to continue in line with their expectations, with the strength in the U.S. economy putting upward pressure on interest rates. However, they quickly pointed to trade concerns, highlighting it as a threat to growth prospects.

The BOC also shared expectations for moderation in growth from 2.8% in Q2 to just 1.5% in Q3 this year, citing dampened housing spending and potentially weaker business investment.

When it came to price levels, the central bank noted that “CPI inflation is expected to edge up further to about 2.5 per cent before settling back to 2 per cent by the second half of 2019.”

During the presser, Poloz reiterated their data-dependence, adding that rate hikes will be needed but they’re not sure about the pace yet. BOC official Wilkins also mentioned that their growth forecasts are already “very prudent” which suggests more room for upside surprises.

Major Market Mover(s):

USD

Dollar domination was still the name of the game during the New York session as bulls carried on with their charge from the earlier round.

Analysts point to a number of factors sustaining the scrilla’s rally, particularly pre-CPI positioning on upbeat PPI results and a shift to a more hawkish stance by FOMC member Evans.

USD/JPY advanced from 111.22 to a high of 112.18, USD/CHF ticked up from a low of .9905 to .9966, EUR/USD tumbled to 1.1676, and GBP/USD slumped to the 1.3200 levels.

AUD & NZD

The comdolls were all in a weak spot but the Aussie was the weakest of them all as trade troubles with China could hit its export sector the hardest. The Kiwi followed its close buddy on the losers’ end.

Besides, the Loonie still managed to draw some support from the BOC statement even as crude oil declines pulled it in the opposite direction.

AUD/USD slumped from .7415 to a low of .7360, AUD/JPY slid from a high of 82.72 to a low of 82.39, EUR/AUD popped up to a high of 1.5883, GBP/AUD is up to the 1.7300 mark, and AUD/CAD hit a low of .9714.

NZD/USD is down from the .6800 levels to a low of .6749, EUR/NZD climbed from 1.7244 to 1.7300, GBP/NZD is at 1.9545, AUD/NZD held on to 1.0900, and NZD/CAD slipped to .8925.

Watch Out For:

  • 1:00 am GMT: Australia MI inflation expectations (4.2% previous)