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The Greenback brought sexy back, boosted by mostly upbeat U.S. economic figures ahead of the FOMC meeting. However, the Loonie was able to put up a stronger fight thanks to upbeat monthly GDP and producer prices.

  • Canadian economy grew 0.5% vs. 0.3% consensus in May
  • Canada’s raw materials price index up 0.5% vs. 2.7% forecast
  • Canada’s industrial product price index up 0.5% vs. 0.3% forecast
  • U.S. core PCE price index at 0.1% as expected, 0.2% previous
  • U.S. employment cost index at 0.6% vs. 0.7% forecast in Q2
  • U.S. personal spending and income up 0.4% as expected
  • Chicago PMI jumped from 64.1 to 65.5 vs. projected fall to 61.9
  • U.S. CB consumer confidence index up from 127.1 to 127.4 vs. 126.5 consensus
  • Australia’s AIG manufacturing index down from 57.4 to 52.0
  • New Zealand employment change up 0.5% vs. 0.4% forecast in Q2
  • New Zealand jobless rate ticked up from 4.4% to 4.5%
  • New Zealand labor cost index up 0.6% as expected
  • U.S. Treasury to impose 25% tariffs on add’l $200B Chinese goods?

Major Events/Reports:

Mostly upbeat U.S. data

‘Twas a busy day when it came to economic releases during the New York session, and Uncle Sam was able to see mostly green in the latest batch.

The only miss was the quarterly employment cost index, which came in at 0.6% versus the 0.7% forecast for Q2, reflecting a slightly slower pace of wage growth for the period. This was also slower compared to the earlier 0.8% increase.

Personal income and spending both came in line with expectations of 0.4% gains, though, while the core PCE price index also hit the mark at 0.1%. This places the year-over-year June inflation reading at 1.9%, just a notch shy of the 2% Fed target.

These have kept consumer confidence supported in July, as the CB index improved from 127.1 to 127.4 instead of dropping to 126.5. Underlying data revealed that respondents had a more upbeat assessment of current conditions, such as employment and business activity, but their outlook for the next six months was mixed.

Chicago PMI beat expectations by rising from 64.1 to 65.5 – its highest level in six months and fourth consecutive increase – instead of falling to the estimated 61.9 reading. Most components saw gains in July, except for the index for supplier deliveries.

Strong data from Canada

The Great White North was not to be outdone as it also printed a couple of stronger than expected economic reports.

For one, the monthly GDP showed that the Canadian economy grew 0.5% in May, beating the 0.3% consensus. This was also a significant improvement over the earlier 0.1% expansion.

Components of the report revealed that growth was broad-based, with 19 out of 20 industrial sectors posting gains enough to bring the year-over-year reading to 2.6% versus the 2.3% estimate. Higher commodity prices also boosted the mining, quarrying and oil & gas industries.

As for leading inflation indicators, the raw materials price index came up short at 0.5% versus 2.7% while the industrial product price index also beat expectations at 0.5% versus 0.3%.

Resurfacing trade war jitters

Before the session came to a close, alarm bells started ringing on returning trade war troubles as newswires picked up on the U.S. Treasury’s plans to impose 25% tariffs on $200 billion worth of Chinese imports. It ain’t over!

Now this could mean an escalation of tensions between the U.S. and China as the initial threat was just 10% in tariffs. Recall that the Trump administration already imposed 25% in tariffs on $34 billion worth of Chinese products earlier this month.

This comes after a bit of good news about U.S. Treasury Secretary Mnuchin and Chinese Vice Premier Liu He having hush-hush conversations on addressing the matter and restarting negotiations.

Keep in mind that U.S. officials are currently reviewing trade measures on an additional $16 billion goods, which are set to drop this week as well. Cue the PBOC making another set of ninja moves on the USD/CNY reference rate!

Major Market Mover(s):

USD

The scrilla clawed its way back to the winning side, drawing support from mostly upbeat medium-tier figures supporting odds of another upbeat FOMC announcement.

EUR/USD retreated from a high of 1.1747 to a low of 1.1684, USD/JPY continued to climb to a high of 111.96, USD/CHF recovered from .9871 to the .9900 handle, and GBP/USD fell from 1.3162 to a low of 1.3089.

CAD

The only major currency that was able to give the Greenback a run for its money was the Loonie, which got an even stronger boost from Canada’s reports.

USD/CAD fell from 1.3064 to a low of 1.2981, CAD/JPY kept rising from 85.51 to 86.13, EUR/CAD slipped from 1.5308 to 1.5192, and GBP/CAD tumbled to a low of 1.7046.

Watch Out For:

  • 12:30 am GMT: Japanese final manufacturing PMI (no change from 51.6 expected)
  • 1:45 am GMT: Chinese Caixin manufacturing PMI (dip from 51.0 to 50.9 eyed)
  • 6:30 am GMT: Australia commodity prices y/y (6.6% previous)