The US dollar returned some of its recent wins when risk appetite appeared to return in the markets. Data from the US came in mixed, with the Philly Fed index showing a stronger than expected return to expansion and the initial jobless claims printing a larger than expected increase. Headline CPI fell to 0.2%, lower than the projected 0.3% figure, while core CPI was unchanged at 0.2% as expected. US building permits and housing starts are due today.
The euro regained ground against most of its counterparts, except for the British pound. Data from the euro zone came in line with expectations as the final CPI readings for the region were unchanged. The shared currency got a boost from rumors that the EU referendum might be postponed following the shooting of an MP in the UK, which has prompted PM Cameron to suspend Brexit campaigning temporarily. The Italian trade balance and euro zone current account balance are up for release.
The pound staged a strong rally when PM Cameron suspended Brexit campaigning today until the weekend, following the death of MP Jo Cox after she was attacked yesterday. UK retail sales beat expectations with a 0.9% gain versus the projected 0.3% uptick while the BOE kept interest rates unchanged as expected. There are no reports due from the UK economy today, leaving the pound sensitive to Brexit updates.
The franc gave up ground to its peers when European traders speculated that the Brexit vote might be pushed back or that the shooting of UK MP Jo Cox might convince voters to favor staying in the EU. The SNB kept interest rates unchanged as expected while noting that they continue to watch FX levels closely.
The yen had a strong rally earlier in the day as risk aversion was present but soon gave up its gains when risk-on moves returned. The BOJ kept monetary policy unchanged as expected and refrained from strongly jawboning the yen, although other government authorities have been more vocal. There are no reports due from the Japanese economy today, which means that market sentiment could push yen pairs around once more.
Commodity Currencies (AUD, NZD, CAD)
The comdolls took advantage of the risk rallies to advance against the dollar and yen. Australia’s jobs report beat expectations with a 17.9K gain in hiring versus the projected 14.9K increase. Canada’s CPI reports are up for release, with the headline figure likely to post a 0.5% gain and the core figure expected to show a 0.3% increase.