US Open Note – Dollar rises further after retail sales; kiwi is notably up

Dollar continues to gain momentum as retail sales rise

The US dollar is attempting to move higher against a basket of major currencies with US stock futures recovering some of yesterday’s losses. Dollar/yen is advancing above the 110.00 round number, surpassing the 40-day simple moving average (SMA) as retail sales for June gained 0.6% from the previous month, following a revised 1.7% drop in May and significantly outperforming market estimates of a 0.4% drop.

Also, the Bank of Japan did not make any policy changes at its policy meeting, albeit there were some headlines regarding a "green lending scheme" earlier in the day, so dollar/yen kept its move above 110.00.

On the second day of his testimony, Fed Chair Jerome Powell maintained the same tone as on Wednesday, while St. Louis Fed President Bullard stated emergency measures should be phased off. The inflation and economic projections justify tapering, according to Bullard, and the Fed will still be able to keep inflation expectations in line. Unlike Powell, he believes the goal of "significant further progress" has been achieved. Finally, another FOMC member, Evans, stated that a policy change may come before the end of the year, but that a rate hike will have to wait until early 2024.

Euro and pound post losses

The Bank of England made additional hawkish statements yesterday, pushing short-end rates higher. MPC member Saunders said they should begin withdrawing QE in the next couple of months after Deputy Governor Ramsden indicated policy may have to react sooner to rising inflation.

In coronavirus news, cases in the UK have reached their highest number over the last six months and Angela Merkel is urging Biden to ease travel restrictions with the EU. If the situation worsens, the UK administration already considering imposing more limitations, but for now, more stages of reopening are planned. Fortunately, the death toll continues to be extremely low. Looking at the British pound, it is heading north, remaining above $1.3800.

The euro area's annual inflation rate was confirmed at 1.9% in June 2021, matching the preliminary estimate and dropping from a two-and-a-half-year high of 2% in May. Euro/dollar is slipping marginally below 1.1800 after the release of the data.

Kiwi is the best performer; gold plunges

The best performing currency of the day is the kiwi after stronger CPI figures. Growing prospects of an RBNZ rate hike next month are driving the kiwi higher, with kiwi/dollar holding near the 0.7000 psychological level. Aussie/dollar and dollar/loonie are travelling near their opening levels on Friday.

In other markets, oil prices are holding below $72.00/per barrel and the yellow metal is losing momentum after the pullback from the 200-day SMA at $1,825/per ounce.

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