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A bit of risk aversion was still in play throughout the New York session, but the dollar barely took advantage of safe-haven flows. Upbeat remarks from Fed Chairperson Powell hardly gave the U.S. currency much bullish direction either.

Some profit-taking action weighed on the yen early in the session, but it managed to pare most of those losses against the commodity currencies before the closing bell.

Meanwhile, European currencies remained under bearish pressure, but sterling managed to drift slightly higher on U.K. officials’ remarks.

  • New Zealand GDT auction yielded a 1.9% drop in dairy prices, -1.3% previous
  • Fed head Powell: U.S. outlook “remarkably positive”
  • Powell: Not seeing impact of tariffs on inflation data so far
  • Powell: Global growth under pressure but still healthy
  • Italy’s Deputy PM Di Maio: Not turning back from 2.4% deficit target
  • Australia’s AIG services index up from 52.2 to 52.5

Major Events/Reports:

Remarks from Italy’s Di Maio

After strong remarks from Borghi and Conte earlier in the day, it was Italian Deputy Prime Minister and 5-Star Movement leader Luigi Di Maio’s turn to share his thoughts on the budget.

For newbies just tuning in, the Italian government recently finalized their 2019 budget but their spending plans are likely to be rejected by EU officials since these go way beyond agreed-upon limits. My buddy Forex Gump has more on why Italy’s budget is a big deal.

In a radio interview, Di Maio stressed that they’re not backing down on their budget plans, saying:

“We are not turning back from the 2.4% target.We will not backtrack by a millimeter.”

He even pinned the blame on leaders of France and Germany for wanting the Italian government to fail, as he claimed their hard line stance on the budget has led to a sharp selloff in Italy’s stocks and bonds.

Powell stays optimistic

In his speech about the outlook for employment and inflation at the National Association for Business Economics Annual Meeting, Fed Chairperson Powell reiterated some of his upbeat views shared in earlier rate statements.

He started off by mentioning that unemployment is near a 20-year low and that inflation is running close to the central bank’s 2% target, adding that these favorable conditions are likely to continue:

“From the standpoint of our dual mandate, this is a remarkably positive outlook.”

Most of his speech focused on the dynamics of inflation and employment, most notably the Philips Curve. In summary, he pointed out that the combination of low inflation and very low unemployment shows that these are “extraordinary times.”

During the Q&A, when asked on the impact of tariffs on inflation, Powell clarified that they’re not seeing any effects on data so far.

Major Market Mover(s):

JPY

The yen returned a chunk of its gains from the earlier session but managed to pare losses versus higher-yielders later on and remained strong versus the dollar.

USD/JPY slid from 113.86 to a low of 113.52; EUR/JPY pulled up from 130.72 to a high of 131.51; NZD/JPY rebounded from 74.71 to 75.12 then fell back to 74.83, and AUD/JPY bounced to 81.89 but fell back to 81.67.

GBP

Sterling got a modest lift on signs of support from former London mayor Boris Johnson for U.K. PM May’s government, even after throwing a bit of shade on the Chequers plan.

Brexit minister Raab also expressed willingness to listen to other ideas from the EU, particularly a technological solution to the Irish border issue.

GBP/USD pulled up from a low of 1.2940 to 1.2996 before cruising sideways; GBP/JPY ticked up from 147.20 to a high of 147.85; EUR/GBP held on to the .8900 mark, and GBP/AUD bounced from a low of 1.8015 to 1.8059.

Watch Out For:

  • 12:00 am GMT: New Zealand ANZ commodity prices (-1.1% previous)
  • Chinese banks closed in observance of National Day