Dollar rebounds as focus shifts to central bankers

Here is what you need to know on Wednesday, June 29:

The greenback capitalized on safe-haven flows on Tuesday and the US Dollar Index gained more than 0.5%. Markets remain cautious mid-week and the dollar continues to hold its ground against its major rivals. Business sentiment data from the euro area, German inflation figures and the final revision to the first quarter Gross Domestic Product from the US will be looked upon for fresh impetus. More importantly, FOMC Chairman Jerome Powell, ECB President Christine Lagarde and BOE Governor Bailey will speak at the ECB’s annual Forum on Central Banking. 

The data from the US showed on Tuesday that the consumer sentiment continued to weaken in June with the Conference Board’s Consumer Confidence Index dropping to 98.7 from 103.2 in May. Additionally, the survey showed that the one-year consumer inflation rate expectations climbed to 8% from May’s revised print of 7.5%. In response, the S&P 500 lost nearly 2%.

EUR/USD came under renewed bearish pressure and fell below 1.0500 in the early European session after having closed deep in negative territory on Tuesday. European Central Bank (ECB) policymaker Gediminas Simkus said on Wednesday that it was very likely for the bank to hike the policy rate by 50 basis points in September but this comment failed to help the shared currency find demand. Meanwhile, Reuters reported the bank was evaluating whether to announce the size and the duration of the bond-buying scheme that will be used against fragmentation at its next policy meeting.

GBP/USD trades below 1.2200 in the European morning. Brexit-related political jitters weigh on the British pound after members of parliament approved the bill allowing ministers to eliminate parts of the Northern Ireland Protocol.

AUD/USD rose modestly during the Asian trading hours after the data from Australia showed that Retail Sales rose by 0.9% on a monthly basis in May, surpassing the market expectation of 0.4% by a wide margin. With the dollar preserving its strength, however, the pair fell into negative territory below 0.6900. 

USD/JPY consolidates its gains above 136.00 after having closed the previous three trading days higher. “Unlike other economies, the Japanese economy has not been much affected by the global inflationary trend so monetary policy will continue to be accommodative,” Bank of Japan (BOJ) Governor Haruhiko Kuroda said earlier in the day.

Gold continued to push lower and touched its lowest level in nearly two weeks at $1,816. With the benchmark 10-year US Treasury bond yield losing nearly 1% early Wednesday, however, XAU/USD’s losses remain limited for the time being.

Bitcoin stays on the back foot and closes in on $20,000. Ethereum is falling for the fourth straight day and was last seen losing more than 1% on the day at $1,130.

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