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Analysts at Westpac noted that the equity rebound that began in Asia continued in Europe and the US, helping AUD/USD recover some lost ground to just above 0.7400.  

Key Quotes:

“US consumer prices rose 0.1% in June, less than expected, although rose on an annual basis to 2.9% from 2.8% – the fastest pace since early 2012. Core CPI matched expectations, rising 0.2% in the month to be up 2.3% on a year ago (from 2.2% previously). Steep price declines in a couple of categories – electricity and hotel lodging – accounted for most of the soft June reading. Going forward, a tightening labour market, firm energy prices and tariffs point to building inflation pressures.”

“EUR/USD was dead flat on the day at 1.1670, trading narrow ranges, brushing aside the European Commission’s downward revisions to growth forecasts. GBP/USD was likewise net unchanged at 1.3210. USD/JPY rose from 112.25 to 112.63 – the highest since January.”

“Commodity currencies outperformed in the improved risk environment. AUD rose 40 pips over the day, to 0.7410. The fact that the Chinese yuan was Asia’s strongest currency was helpful. CAD rallied 0.5c to 1.3160 and NZD a more modest 25 pips to 0.6775. AUD/NZD rose 0.3% to 1.0930.”

“Fedspeak came from Chair Powell in a radio interview, where he said the Fed is close to its dual mandate but the economy is not overheating, and Harker and Mester who both thought two more rate hikes is possible this year. The US 10yr treasury yields initially rose from 2.85% to 2.87%, but retraced after the US CPI data. Similarly, 2yr yields rose from 2.58% to 2.60% – the highest since 2008 – before retracing. Fed fund futures yields continued to price 1 ½ more hikes in 2018.”