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The Greenback was already having a good run leading up to Fed head Powell’s testimony and his remarks drove the currency even higher. On the flip side, the British pound lagged further behind on Brexit developments.

  • Canadian manufacturing sales rebounded 1.4% in May
  • U.S. industrial production up 0.6% vs. 0.5% forecast in June
  • U.S. May industrial production downgraded from -0.1% to -0.5%
  • U.S. capacity utilization up from 77.7% to 78.0% vs. 78.4% consensus
  • U.S. NAHB housing market index unchanged at 68 vs. 69 forecast
  • Fed Chairperson Powell: Will not declare victory on inflation yet
  • Powell: Productivity growth to lift stagnant wages
  • Powell: Hard to gauge outcome of trade disputes
  • U.K. gov’t wins customs union vote by six votes
  • Brexit Trade Bill passed third reading, on its way to House of Lords
  • New Zealand GDT auction yielded 1.7% drop in dairy prices

Major Events/Reports:

Positive remarks from Powell

Dollar bulls had already been anticipating optimistic remarks from Fed Chairperson Powell, and he didn’t disappoint. Much like his remarks during the latest FOMC statement, he sounded positive that the U.S. economy is performing well and could continue to do so.

In his testimony on the Semiannual Monetary Policy Report before the Senate Banking Committee in Capitol Hill, Powell noted that the jobs market has strengthened and that inflation has moved a bit above their 2% target.

He cited some factors that could keep the economy in tip-top shape, including federal tax and spending policies that would likely support growth. Powell also acknowledged that the financial system is stronger and that the outlook for global growth remains solid despite uncertainties.

However, he was quick to clarify that the challenge for policymakers is to keep inflation within target. He also cited that slow wage growth could be addressed by an increase in productivity.

During the Q&A, Powell reiterated that they wouldn’t declare victory on inflation just yet. He also had some remarks on ongoing trade tensions, citing that countries that are open to trade have grown faster.

On the subject of trade, Powell admitted that it’s hard to gauge the outcome of current disputes. He did say that if it results to lower tariffs, it could wind up being good for the domestic economy.

Brexit Trade Bill clears third reading

The U.K. government narrowly avoided defeat in passing the customs union component of Trade Bill in the House of Commons. Many say that if it weren’t for those six votes, a vote of confidence in PM May or possibly a general election would have been triggered. Phew!

You see, this Trade Bill basically lays the groundwork for an independent trade policy after Brexit. Twelve Conservative MPs voted to keep the U.K. in the customs union if no trade deal is struck with the EU by January next year, but the noes outnumbered ayes by 307 to 301.

However, the U.K. government was defeated in a less crucial component on the free flow of medicines with the EU, also known as Clause 17.

The Trade Bill will now make its way to the House of Lords, so it may still be a little early to say that PM May is out of the woods.

Major Market Mover(s):

USD

The dollar carried on with its climb as Fed head Powell expressed confidence in the U.S. economy and data supported his optimistic views.

USD/JPY advanced from 112.39 to 112.89, USD/CHF rallied from .9934 to parity, AUD/USD slid to .7380, EUR/USD is down to 1.1654, and NZD/USD fell to .6780.

GBP

Even though PM May managed to snag a victory in the Trade Bill customs union vote, pound bulls seemed unconvinced that the Brexit drama could work itself out.

GBP/USD tumbled from 1.3240 to a low of 1.3069, GBP/JPY fell from 148.98 to a low of 147.64, GBP/AUD is down to 1.7768, GBP/CHF dropped back to 1.3115, and EUR/GBP is up to a high of .8914.

 

Watch Out For:

  • 12:30 am GMT: Australia’s MI leading index (-0.2% previous)