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King dollar ruled the roost in Asia, consolidating yesterday’s extensive rally fuelled by upbeat US industrial figures and Fed Chair Powell’s testimony  on the Semiannual Monetary Policy Report before the Senate Banking Committee.

Amongst G10 currencies, the USD/JPY pair hit fresh six-month highs above the 113 handle while the Antipodeans traded a touch lower amid mixed oil prices. The Euro and the pound remained on the back foot, in the wake of monetary policy divergence and Brexit uncertainty.

Meanwhile, the Asian equity markets traded with moderate gains, led by the rally in the Japanese indices. Gold prices on Comex extended its consolidative-mode near yearly lows of $ 1226 amid firmer positive Treasury yields and heading towards the round 2 of Fed Chair Powell’s testimony.

Main topics in Asia

US planning Uranium probe in search of tariffs – Bloomberg

According to reporting by Bloomberg, the Trump administration is planning  to begin an investigation into uranium imports which could lead to further border tariffs on national security grounds.

Trump defense chief open to talks with Russian counterpart – Reuters

According to reporting by Reuters, US Defense Secretary James Mattis is open to holding talks with Russian Defense Minister Sergei Shoigu, a move that hasn’t been made since 2015.

EU-Japan trade pact to see almost all trade barriers eliminated

The massive EU-Japan trade agreement, which has been winding through negotiations for four years, is now heading off to the EU’s and Japan’s respective parliaments for ratification, which is expected to go smoothly.

Fed’s George: Gradual further rate hikes are needed

Kansas Federal Reserve (Fed) President Esther George (a dove) was on the wires last hour, via Reuters, commenting on the US rate hike outlook.

Asian stocks continue the move higher following the hawkish US Fed’s Powell

Asian stock markets are on the upside following a bullish showing from the US Fed’s chairman Jerome Powell, but a subdued undertone remains in Chinese  indexes.

S. Korea Finance Ministry sees 2018 growth at 2.9% vs. 3% previous forecast

Do Kyu-sang, a director general  at the South Korean Finance Ministry, is out with his take on the country’s economic outlook at a press conference, following the release of its bi-annual economic policy report.

Key Focus ahead

There are plenty of risk events lined up for release today that may have a significant impact across the fx space. The main focus in the European session is likely to be the UK consumer price index (CPI) data, which is expected to come in a tad firmer at 2.6% y/y in June versus 2.4% previous while the core figures are also seen higher at 2.2% y/y versus 2.1% last. Also, of note remains the Eurozone final CPI release that will confirm the flash reading of 1.0% on an annualized basis.

Moving on, the US housing starts and building permits data will headline the NA session ahead of the Fed Chair Powell’s testimony on the Semiannual Monetary Policy Report before the House Financial Services Committee. No surprises are expected from the Round 2 of Powell’s speech, as he is likely to reiterate yesterday’s comments on the inflation and interest rates outlook.

Further, the US Energy Information Administration (EIA) will publish its weekly crude stockpiles report that will offer fresh impetus to the oil and Canadian dollar traders. Meanwhile, the Fed Beige book will be published at 1800 GMT.

EUR/USD: Focus back on Fed-ECB divergence

The common currency will likely report losses today. The monetary policy divergence may widen further in the EUR negative manner if the Eurozone June CPI is revised lower today.

GBP/USD staggering into 1.31 as Brexit continues to weigh ahead of the UK CPI reading

Wednesday brings high-impact Consumer Price Index numbers early in the London session at 08:30 GMT and the y/y CPI is expected to tick upwards to 2.6%, compared to the last reading of 2.4%, while Core CPI is expected to move from 2.1% to 2.2%.

How to trade the UK inflation data with GBP/USD

Headline  UK inflation is closely watched by the BOE and has a significant impact on the Pound. The Market Impact Tool shows trading opportunities in both upside and downside surprises on this event.

UK: June’s CPI rise a temporary blip? – Nomura

Analysts at Nomura offer a sneak peek at what to expect from the UK CPI release due today at 0830 GMT.

The Independent: EU’s Juncker to meet Trump on July 25 at the White House – Reuters

Jean-Claude Juncker, President of the European Commission, will meet the US  President Donald Trump  on July 25 at the White House to discuss security and economic matters.  

Brent to retest $80/ barrel by end-2018 – Goldman Sachs

In its latest client note on  oil  prices, the US investment bank, Goldman Sachs, noted that it continues to expect high supply volatility with potential for further disruptions in the coming months.