Euro expands gains to two-month high amid positive outlook
The euro rose in European trade on Thursday against a basket of major rivals, expanding gains for the fourth straight session against the US dollar and hitting a two-month high amid a strong outlook for more gains as the odds of an ECB rate cut in July diminished.
US inflation missed estimates in May, reducing pressures on the Fed’s policymakers and boosting the odds of a September rate cut.
The Price
The EUR/USD price rose 0.45% to $1.1539, an April 22 high, with a session-low at $1.1483.
The euro rose 0.5% on Wednesday against the dollar, marking the third profit in a row following US inflation data.
European Rates
ECB President Christine Lagarde hinted at the possible end of the current cycle of policy easing, which was in response to a combined shock such as the Covid 19 pandemic, the Ukrainian war, and the energy crisis.
According to a Reuters source, most ECB members now aim at holding interest rates unchanged in July, with the global markets now expecting just an additional 25 basis points of rate cuts by the end of the year.
The odds of a 0.25% ECB rate cut in July now stood below 30%, with traders awaiting more eurozone data and remarks by ECB officials to gather more clues.
US Rates
Recent data showed US inflation rose less than expected in May, with limited effects so far for Trump’s tariffs on prices.
Following the data, traders raised their estimates for a Federal Reserve rate cut in September.
Now traders await US producer prices data later today to gather even more clues.
Yen climbs for second straight session
The Japanese yen rose in Asian trade on Thursday against a basket of major rivals, extending gains for the second straight session against the US dollar after major inflation data.
US inflation missed expectations in May, reducing price pressures on Fed policymakers and bolstering the odds of a September Fed rate cut.
The Bank of Japan is convening next week to discuss latest economic policies, with a less than 50% chance of a 0.25% rate hike.
The Price
The USD/JPY price fell 0.55% today to 143.72, with a session-high at 144.54.
The yen rose 0.25% on Wednesday against the dollar, the second profit in three days away from a two-week trough at 145.46.
US Rates
Recent data showed US inflation rose less than expected in May, with limited effects so far for Trump’s tariffs on prices.
Following the data, traders raised their estimates for a Federal Reserve rate cut in September.
Now traders await US producer prices data later today to gather even more clues.
Japanese Rates
The Bank of Japan is meeting on June 16-17 to discuss the latest economic developments and suitable policies.
Following recent GDP growth data, the odds of a Bank of Japan 0.25% interest rate hike in June rose from 40% to 45%.
Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.
Now traders await more Japanese data on inflation, unemployment, and wages to gather additional clues.
US dollar falls after inflation data, interest rate forecasts
The US dollar fell against most major rivals on Wednesday following weaker than expected inflation data, which boosted the odds of a Fed rate cut soon.
Earlier US data showed core consumer prices rose 2.8% y/y in May, as expected.
The US and China reached a trade framework in London after two days of intensive negotiations, with representatives waiting for the final approval of Trump and Xi Jinping to move forward.
This progress comes after an important deal reached in mid May, which stopped the enforcement of most tariffs for 90 days.
Trump said China will supply rare-earth minerals and magnets to the US, and will get chip exports from America, with restrictions on Chinese students in US universities will be lifted as well.
Otherwise, the dollar index fell 0.5% as of 20:43 GMT to 98.6, with a session-high at 99.2, and a low at 98.5.
Aussie
The Australian dollar fell 0.3% as of 21:23 GMT to 0.65 against its US counterpart.
Loonie
The Canadian dollar stabilized at 0.7315 against its US counterpart.
Brent approaches $70 a barrel after a 4% surge
Oil prices surged on Wednesday amid mounting optimism in the markets as the US and China reached a trade agreement.
The US and China reached a trade framework in London after two days of intensive negotiations, with representatives waiting for the final approval of Trump and Xi Jinping to move forward.
Trump said China will supply rare-earth minerals and magnets to the US, and will get chip exports from America, with restrictions on Chinese students in US universities will be lifted as well.
Oil was also boosted after Iran threatened to strike US bases if America attempted an attack on its nuclear facilities.
US President Trump said he has less confidence now that Iran would agree to stop uranium enrichment.
Otherwise, the Energy Information Administration reported a drawdown of 3.6 million barrels in US crude stocks last week to a total of 432.4 million barrels, while analysts expected a drop of 2.4 million barrels.
Gasoline stocks rose 1.5 million barrels to 229.8 million barrels, while distillate stocks rose 1.2 million barrels to 108.9 million barrels.
On trading, Brent futures due in August rose 4.34%, or $2.9 to $69.77 a barrel.
US crude futures due in July rallied 4.88% to $68.15 a barrel.