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  • The US dollar climbed  against most of the G10 as market attention shifts to BoC and Federal Reserve Powell.  
  • Markets are now pricing less easing for the FOMC July meeting, now at 27bp.

The US dollar climbed  against most of the G10 and US yields rose on the sentiment that the Federal Reserve could hold off from cutting rates at the next meeting around later this month. Philadelphia Federal Reserve president Harker who will be a voter next year was reported to have  told the WSJ that he doesn’t see a compelling reason to cut interest rates – Harker views the US economy as solid enough.  US 2-year  treasury yields climbed from 1.87% to 1.91% while the 10-year  yields rose from 2.03% to 2.07% and markets are now pricing less easing for the July meeting, now at 27bp.

As for data,  the Job openings in the US fell slightly to 7.32 million in May with just 72,000 new jobs added in the month. “This indicates some cooling in the labour market. There are still more jobs available than workers to fill them, but employers say they can’t get workers with the skills they need,” analysts at ANZ Bank explained.  

Currency action

  • EUR/USD scored a  four-week low of 1.1193 but was mostly sideways around 1.12 the figure with a high of 1.1218.
  • GBP/USD was one of the worst performers, sliding throughout overnight markets from  1.2510 to 1.2440 traded in London.
  • USD/JPY made a six-week high of 108.96.
  • AUD was the worst performer of the G10s, falling from  0.6960 to 0.6921 to mark down  a three-week low.
  • NZD/USD dipped lower  from 0.6630 to 0.6601.
  • AUD/NZD subsequently lost  40 pips.

 

Key notes from Wall Street

  • Wall Street’s benchmarks sulking and closed in the red once again

Day ahead

As for the day ahead, we have the  Bank of Canada is expected to  remain firmly on hold at 1.75%. However, the key  focus will be with Fed chair Powell who begins his semi-annual testimony to Congress at 10 am NY time.

  • “After a prepared statement, he will take many questions from members of the House Committee on Financial Services. Yields bounced after the strong growth in non-farm payrolls in June but money markets are still fully priced for a 25bp cut in the federal funds rate at the end-July FOMC meeting.
  • If the Fed is not inclined to act so soon, then this is the time for Powell to shift market expectations.
  • Westpac recently changed its call from 2 Fed cuts in Sep and Dec to 2 cuts in Jul and Oct/Dec. After Powell finishes his testimony we will see the minutes from the FOMC’s 18-19 June meeting,”

analysts at Westpac explained.