Today's headlines: USD remains weak after Fed says inflation heading for target | CAD weakened by weak Chinese data | GBP/NZD near 9-month high...

USD remains weak after Fed Chair says inflation heading for target

Jerome Powell, the chairman of the US Federal Reserve, said yesterday, that he is confident inflation is heading for their 2% target. Add this to his other recent comments and those of many of his colleagues, and you have a recipe for earlier-than-expected US interest rate cuts. That has kept the US dollar on the back foot ahead of this afternoon's retail sales numbers, which are expected to be slightly negative. The GBP/USD rate remains around $1.2950, half a cent below Friday's high. EUR/USD is just shy of $1.09.

CAD weakened by weak Chinese data – soft inflation expected

Soft economic growth data from China is always likely to weaken the commodity markets because China is such an enormous consumer of raw materials. That directly impacts the value of the currencies of the countries that derive much of their overseas income from oil, gas, iron ore, mined metals & minerals etc. Canada is one of those countries. Add in a little sterling strength and it is perhaps not surprising to see the GBP/CAD exchange rate hitting the highest levels we have seen since March 2021. This pair starts the day at CAD 1.7735 and may rise even higher if this afternoon’s headline Canadian consumer inflation number for June, comes in any softer than the 2.9% we saw in May. That may prompt the Bank of Canada to hustle in earlier than expected rate cuts. The caveat is that higher commodity prices – and gold is near?record highs – do make Canada’s exports more valuable, as long as demand remains stable. It is the proverbial double-edged sword.

GBP/NZD near 9-month high ahead of NZ inflation

Late this evening, (UK time) we will see the release of New Zealand's consumer price index for the second quarter of the year. The market consensus is that we will see approximately 3.5% price growth in the year to June. That is down from the Q1 figure of 4.0% but still comfortably above the Reserve Bank of New Zealand's target level of 2%. Ahead of the data, a well-supported pound and a Kiwi dollar hampered by soft Chinese data means the GBP/NZD rate is hitting the highest levels we've seen in nine months in the interbank market at around NZD 2.1380. I had it pointed out to me this morning that in 2023, this pair rose for five straight months Before peaking at nearly 2.16 in August 2023 before tumbling more than 16 cents in the following 4 months. As at this morning, we have seen 5 straight months of upward movement in this pair. NZD buyers will be hoping history doesn’t repeat itself and NZD sellers will be wishing for just the opposite at this stage.?

Today's Major Economic Releases

08:00 EUR ECB Bank Lending Survey?

12:30 CAD BoC Consumer Price Index Core (YoY)(Jun)?

12:30 CAD Consumer Price Index (YoY)(Jun)?

12:30 USD Retail Sales (MoM)(Jun)?

12:30 USD Retail Sales Control Group(Jun)?

22:45 NZD Consumer Price Index (QoQ)(Q2)?

22:45 NZD Consumer Price Index (YoY)(Q2)?

Interbank Exchange Rates