Morning brief for June 29: some news from "central bankers’ party"

The US dollar shuddered to its lows as central bankers’ bias turned tighter. The greatest moves were evidenced in the pairs containing CAD, GBP, EUR, AUD.

The euro surged to 1.1420 in the previous sessions as ECB President Mario Draghi signaled that the monetary policy stimulus might be toned down towards the end of this year. He noted that the link between monetary policy and the performance of the real economy is working; the link between growing real economy and inflation is becoming more subdued than in the past though.

In the upcoming hours, EUR might lose some points against the greenback sliding to 1.1375/1.1330 as the further upside is a bit complicated. German and Spanish inflation rates might push it a bit higher towards 1.1420 if releases are upbeat (higher inflation rates). The main focus is the US final GDP which is out at 4:30 pm GMT+3. There is no change is forecasted. So, we don’t expect great moves from the USD upon the announcement unless data print is disappointing.

Preview from eFXplus

USD/JPY was a bit laggard today. It did slip though despite weaker retail sales data released earlier today from Japan. The Bank of Japan Policy Board member, Yutaka Harada is set to deliver his speech later today (0630GMT). He will unlikely set in motion the currently subdued trading of USD/JPY, but just be safe, keep on track his speech.

The British pound also made some wiggles in the past few sessions. Comment from bank of England Governor Carney were interpreted as being hawkish comparing to his last meeting’s comments on the country’s economic performance. He noted that some removal of monetary stimulus will likely to be needed as the economy came closer to running at full capacity. Sterling jumped to 1.2975 following Carney’s comments than slipped a few points and stopped at 1.2955. There is a scope to extension to 1.3000 in the short term.

The Canadian dollar strengthened to 1.3010 from this week opening price of 1.3258 due to hawkish comments from the Bank of Canada Governor Stephen Poloz and higher oil prices. It was the CAD greatest daily gain in three months. You should keep in mind the fact that we are approaching a new interest rate decision that will allow Loonie to gain even more strength. Currently, markers are pricing a 70% chance of a rate hike in central bank’s July meeting. Crude oil futures rose higher on the back of the biggest decline in the US output.

Aussie spiked to 0.7660 in the course of the past sessions. The Bank of Australia policymakers might follow the example of their US colleagues and tighten their monetary policy, If the RBA’s economic indicators are in line with the bank’s projections, the tightening cycle might start earlier (if not tightening, at least increased hawkishness of the RBA’s policymakers, which is also be well accepted by the AUD).