US Open Note – Dollar unlocks new yearly high versus yen; oil posts new high

Dollar/yen flies above 111.00; US futures in red

As markets wait for US Markit preliminary readings at 13:45 GMT, the dollar is edging higher. After two red days, the dollar index is practically unchanged below 92.00. The US dollar continues to rise versus the Japanese yen, creating new highs for the year, jumping above 111.00. Following Powell's remarks, stocks rallied; however, US futures are currently trading flat on Wednesday. The single currency is heading above $1.19 but is still stuck below the 200-day simple moving average (SMA), while the pound is developing near $1.40.

In his speech before Congress yesterday, Fed Chair Powell said nothing surprising. He emphasized that the Fed is still a long way from raising rates, even though inflation has been higher than forecasted and may continue to be higher for longer. Fed board members Daly and Mester on the other hand, both suggested that they may wait to decide on tapering. Today's speakers are Bowman, Bostic, and Rosengren.

The main focus will be on Markit's preliminary June PMI data. Manufacturing PMI is projected to be 61.5 in June, down from 62.1 in May, and services PMI is expected to be 70.0, up from 70.4 in May. This would result in a modest decrease in the composite PMI from 68.7 in May.

BoE announces interest rate decision tomorrow

The Bank of England (BoE) will announce its decision on Thursday. As policymakers have sounded optimistic in previous meetings, current events in the UK call for caution and recognition of some potential negative risks. Given that the BoE announced tapering at its most recent meeting on May 5, it seems premature to make any additional modifications this week. The next set of updated macro predictions will be released at the August 5 meeting.

Commodity currencies gain more ground

Aussie/dollar is surpassing the $0.7570 barrier and the 200-day SMA, while kiwi/dollar is creating a strong battle with $0.7050. Dollar/loonie is heading south after the pullback off 1.2485 and the Canadian retail sales declined to -5.7% m/m in April from 3.6% before and on a yearly basis decreased to -7.2% versus 4.3%.

Oil hits record high; gold posts modest gains

On Wednesday, WTI crude futures hit a record high of $73.5/per barrel, the highest since October 2018, due to lower stockpiles. Gold prices are falling back below $1,800/per ounce, trading with weak momentum, while silver has found strong support at the 200-day SMA around $25.73/per ounce.

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