Dollar Rises as Market Anticipates 75bps Rate Hike
The United States (U.S) dollar moved against its major trading partners early Thursday before the release of producer inflation data for June and weekly jobless claims with an expectation that the Federal Reserve would remain fast and furious with its hawkish plans.
The U.S Fed is widely expected to raise the federal funds rate by 75 basis points at its July 26-27 meeting, but after a 100-basis point increase by the Bank of Canada on Wednesday there are some market expectations for a similar increase by the Fed at the upcoming meeting. READ: Fed Minutes Show 75bps Hike Appropriate in July
Consumer price data for June released Wednesday morning was stronger than expected while the Fed’s Beige Book report Wednesday afternoon indicated inflation remains brisk and labour markets tight, but there are signs that demand has slowed.
Fed Governor Christopher Waller is scheduled to discuss the economic outlook in a speech later on Thursday, one of the last appearances by a Fed official before the pre-meeting quiet period begins Saturday.
A quick summary of foreign exchange activity heading into Thursday shows that USDCAD jumped to 1.3131 from 1.2979 at the Wednesday US close and 1.3001 at the same point Wednesday morning.
The Bank of Canada surprised with a 100 basis point rate increase Wednesday in a stated effort to front-load increases to avoid a wage-price spiral. Canadian manufacturing sales are scheduled to be released today.
USDJPY rose to 139.1175 from 137.4406 at the Wednesday US close and 137.0528 at the same point Wednesday morning. Japanese industrial production fell at the fastest pace in two years according to data released overnight.
The Bank of Japan is expected to maintain its accommodative monetary policy at its July 20-21 meeting and for an extended period after. USDEUR fell to 1.0009 from 1.0058 at Wednesday’s US close and 1.0059 at the same point Wednesday morning.
There are no EU data scheduled for release Thursday. The European Central Bank is expected to raise rates at its July 21 meeting. GBPUSD fell to 1.1828 from 1.1890 at the Wednesday US close and 1.1918 at the same point Wednesday morning.
There is no UK data scheduled for release Thursday. The Bank of England meets next on Aug. 4 when it is expected to maintain its tightening cycle with the possibility of a larger 50 basis point increase after a series of smaller 25 basis point hikes. # Dollar Rises as Market Anticipates 75bps Rate Hike
