US CURRENT SITUATION
The Dollar Index is making minor recovery after the greenback touched its lowest level in seven weeks against the major currencies. Market sentiment remains fragile with the US fighting trade wars on several fronts. Investors are cautious ahead of Fed Chair Powell’s speech and the release of durable goods orders. There are already signs of strain building in the economy – ISM manufacturing PMI declined to its lowest reading since October 2016. Dovish comments from the Fed may also weigh further on soft US dollar sentiment.
CANADIAN DOLLAR
USD/CAD falls further for the third successive session, trading near the lower end of recent trading ranges. Comments from Fed Bullard did little to support a sliding greenback. He opined that a rate cut, a shift in current monetary policy should be the next move as the economic landscape is changing. Meanwhile, the mini-revival of the CAD could be attributed to some steady flows in the oil futures market. There is no economic data on the slate today and we expect the pair to consolidate at current levels.
EURO
The Euro is in reversal mode today, after surging nearly 1% yesterday. Inflation number disappointed the traders which prompted some take-profit selling activities in the market. According to Eurostat, euro-area annual inflation dropped to 1.2% in May, down from 1.7% in the previous month. Core inflation at 0.8% was below the market consensus. The ECB meets this Thursday and is unlikely to announce any major shift in its monetary policy.
BRITISH POUND
The mini recovery of the Pound has stalled, as market attention remains glued on political uncertainty and weak economic readings. Investors wait for the next PM to navigate the exit from the EU. On the data front, the UK Construction PMI dropped into contraction territory with a reading of 48.6 points. This follows yesterday’s poor manufacturing PMI which slumped to a 34-month low. This is the sharpest decline in construction output since March 2018.
JAPANESE YEN
The greenback came under pressure after Fed Bullard turned dovish, signalling a rate cut could be on the cards sooner than expected. With US Treasury yields and data remaining soft, the US dollar is expected to trade with a negative sentiment. Trade tensions with several trading partners are also adding to pressure. USD/JPY is on a rebound after testing the waters below the 108 mark. Safe-haven flows still remain the primary driver.
