Market Awaits June Fed, Data Tomorrow

 

USD

The U.S. dollar is a bit on its back foot this morning with the Dollar Spot Index falling modestly. There is little in the way of economic data slated for release today so expect the greenback to take most of its cues from developments abroad.

Later this afternoon, Attorney General Jeff Sessions will be testifying before the Senate Select Committee on Intelligence in an open session. Sessions is expected to be under scrutiny for failing to disclose his meetings with Russian Ambassador during his confirmation process. The hearing will likely be background noise as traders look ahead to tomorrow’s risk events.

At 8:30 a.m. tomorrow, the consumer prices index and retail sales will cross the wires and represent the biggest data releases of the week. Then at 2 p.m., the Federal Reserve’s FOMC will release its interest rate decision. Fed Funds show a 98% probability the Fed will increase rates by 25 basis points for the second time this year. The move is already highly priced in so the greenback might not find much support. The Bank of England, Bank of Japan and the Swiss National Bank all hold policy meetings later this week.

 

EUR 

The Euro shot higher briefly yesterday but relinquished those gains overnight. The common currency is mostly unchanged this morning from yesterday’s close despite some poor economic data. Italian industrial production fell 0.4% in April and rose only 1.0% on a year over year basis, well below forecasts.

 

GBP 

The British pound is attempting to make a comeback after losing nearly one percent yesterday against the U.S. dollar. While political uncertainty is likely to continue to hold down the sterling, there was reason for modest optimism yesterday. Prime Minister Theresa May seems to have retained support of her Conservative MPs. She took the blame for the disastrous snap election and promised to get her party back on track. May has yet to cobble together a coalition government and pressure is building for May to weaken her “hard Brexit’ approach. 

The pound got an added boost after a report showed U.K. inflation soared to its highest level in four years. Annual inflation rose 2.9% in May from 2.7% in April. The print also beat economists’ expectations of 2.7%.