US Open Note – Greenback extends pullback before Powell’s testimony

Dollar declines ahead of Powell’s testimony

Fed Chair Powell will today testify in front of the House, and tomorrow, he will testify in front of the Senate. Right now, his opinions are well-known and is expected to keep QE as open-ended as possible, but if the US data continues to heat up, the expectation is that something more conclusive will come at either the August Jackson Hole Symposium or the September 21-22 FOMC meeting. Fed Governor Daly stated yesterday that it is time to talk about tapering, and that the Fed is in a good position to do so towards the end of this year or in early 2022.

In June, producer prices for final demand in the United States increased by 1% m/m, exceeding market expectations of 0.6% and following a 0.8% increase in May. The US dollar is trading lower against major currencies with US futures pointing to a slight positive open. Dollar/yen is slipping near 110.00 after three straight green days.

Sterling and euro back to gains

The annual rate of inflation in the UK jumped to 2.5% in June 2021, up from 2.1% in May, exceeding market expectations of 2.2 percent. It is the highest pace of inflation since August 2008. Sterling is heading north, but the rising fears about the reopening could send it lower again.

Officials from the European Central Bank are meeting today to discuss whether to proceed with the construction of a digital euro. Euro/dollar is gaining some momentum after yesterday’s sell-off below 1.1800.

BoC policy decision due; commodity currencies move up

Following the Reserve Bank of New Zealand's decision to discontinue quantitative easing, the Bank of Canada is expected to announce another round of bond cutting at its policy meeting today. The focus will be on new economic projections, specifically whether inflation forecasts will be significantly upgraded. The Kiwi, aussie and loonie are moving higher, erasing some losses of the preceding days. Specifically, kiwi/dollar is jumping above the 0.7000 psychological number.

Looking at commodities, oil prices declined near $75/per barrel on growing skepticism about future demand, while the yellow metal is moving higher around $1.825/per ounce, finding resistance at the 100-day simple moving average (SMA).

Overnight, traders’ attention will turn on the Australian employment report.

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