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The sell-off in the US dollar across its main peers continued in Thursday’s Asian trading, as the Asian traders reacted to the dovish testimony by the Fed Chair Powell that more than confirmed Fed rate cuts are likely. Most majors kept their recovery momentum intact, with the Yen having emerged the strongest, followed by the Antipodeans. Gold prices also rallied towards the 1430 level, as Treasury yields extended the overnight declines.

The Aussie extended the bounce and moved closer towards the 0.70 handle amid upbeat Australian home loans data and renewed US-China trade jitters. Its OZ neighbor, the Kiwi traded 0.40% firmer near 0.6670 region, helped by higher oil prices. The USD/JPY pair, on the other hand, fell sharply and breached the 108.00 support area, despite the Asian equities cheering the resurgent Fed rate cut expectations. Meanwhile, both the EUR/USD and Cable extended the recent upside momentum but markets remained wary ahead of the European Central Bank (ECB) minutes and Bank of England (BOE) Chief Carney’s speech due later in the session ahead.

Main Topics in Asia

RBNZ Gov’ Orr: Reserve bank embraces the future

Rumour: U.S. airstrikes are ready to start hitting Iranian targets in Syria

China and US differ over agricultural purchases US Pres. Trump boasted about – The New York Times

USTR announces initiation of Section 301 Investigation into France’s Digital Services Tax

Dow Jones: U.S. blacklisting of Huawei has become a stumbling block in trade talks

US Treasury Secretary Mnuchin urges US firms to seek Huawei exemptions – WSJ

China cautious over trade talks with the US – Global Times

China to introduce more measures to stabilize foreign trade – Xinhua

WTI clings to fresh 7-week high amid US-Iran tension, declining inventories

Gold surges to 8-day high on aftershocks of Powell’s Testimony, trade/political pessimism

Australian Home Loans data arrives above expectations, 0.0%

China won’t introduce another “giant stimulus program” – SCMP

Leaked Document: UK has failed to make meaningful progress towards a free trade deal with US – The Telegraph

Key Focus Ahead

We have a data-light EUR calendar for today, with the only German Final Consumer Price Index (CPI) data up for release at 0600 GMT. The final version is unlikely to have any major impact on the EUR markets, as they await the speech by the European Central Bank (ECB) Governing Council member Benoit Coeure (at 1015 GMT) and the central bank’s June meeting’s minutes (due at 1130 GMT) for fresh hints on a potential rate cut this month or the recent chatter on the restart of the QE program. Also, of note remains the Bank of England (BOE) Governor Carney’s speech (at 1000 GMT) at a press conference following the release of the central bank’s Financial Stability Report (FSR) expected to be published at 0930 GMT.

The NA session is heavy with the Fedspeak, with the day 2 of Fed Chair Powell’s testimony closely eyed at 1400 GMT. Later in the session, the Fed officials Williams, Bostic, Barkin and Kashkari will be speaking and could have a significant impact on the dollar trades, as the US Consumer Price Index (CPI), due at 1230 GMT, is likely to come in mixed. At the same time, the US jobless claims and Canadian New Housing Price Index will be reported.

Markets will continue to keep a close watch on the US-China trade negotiation and UK political development.

EUR/USD rises above key hurdle ahead of ECB’s minutes

EUR/USD is solidly bid while heading into the European session, courtesy of the  dovish testimony by the US Federal Reserve President  Jerome Powell.  The pair may fall apart if ECB minutes hint at a rate cut.  

GBP/USD: Road to recovery intact, eyes on UK politics, US CPI/ Fedspeak

GBP/USD buyers ignore the mixed bag of the UK data as dovish Fed led broad US dollar selling underpins heading into London open. UK politics, US CPI and day 2 of Fed Chair Powell’s testimony will be in the spotlight.

Powell’s Power Play: Fed’s five dollar downers – EUR/USD levels to watch

Fed Chair Powell has opened the door to rate cuts and weighed on the USD. EUR/USD has jumped from the lows and faces a new technical setup.

US inflation preview: FXStreet Surprise Index and Trend Indicators both point down – USD to fall?

The  Fed  Chair is “data-dependent” and the data speaks on Thursday – with the Consumer Price Index (CPI) report for June. FXStreet’s Surprise Index is indicating a downside surprise. Recent inflation trends are also pointing to a negative outcome.

South Korea and Japan to hold trade talks on July 12th

Reuters reports that South Korea and Japan will hold trade talks on July 12th, in the face of the  Japanese restrictions on tech materials exports to South Korea.