First UK Conservative ballot on Wednesday.

The latest New York Fed survey recorded an increase in 1-year inflation expectations to 6.9% from 6.6%, but 3-year expectations declined to 3.6% from 3.9%. Consumers overall were less confident in the labour market.

Markets were uneasy over the threat of an elevated US consumer prices reading on Wednesday.

Kansas City Fed President George stated that the speed at interest rates increase is an open question. The pace needs to be balanced carefully against the state of the economy and financial markets while moving too fast would risk over-steering.

Treasuries regained some ground on Monday with the 10-year yield dipping below the 3.00% level. There was a further net retreat to 2.96% on Tuesday.

The US dollar posted further gains on Monday and there was no change in trend on Tuesday despite a decline in US longer-term bond yields.

The yen remained under pressure with USD/JPY hitting fresh 23-year highs at 137.70 before a slight correction.

EUR/USD also dipped very close to parity with the dollar index at a 19-year high.

China’s new loans increased by CNY2810bn for June from CNY1890bn the previous month and above consensus forecasts of CNY2400bn. Overall social financing also increased by CNY5170bn from CNT2790 previously and also well above market expectations.

The data maintained an element of optimism that the Chinese authorities will provide strong support to the economy.  There were, however, further concerns over the Chinese banking sector and reservations over coronavirus trends.

First UK Conservative ballot on Wednesday.

The official nomination for Conservative Party leadership candidates will be on Tuesday with the first round of MP voting on Wednesday.

There was no relief surrounding the Euro-Zone economy on Monday with underlying confidence remaining notably weak. There was a marginal decline in gas prices for the day, but fears over underlying trends and security of supplies continued. Overall yield spreads continued to underpin the US dollar against low-yield currencies.

There was some caution ahead of Wednesday’s US consumer prices data. EUR/USD continued to lose ground and traded only marginally above parity on Tuesday. A decline in US 10-year yield triggered only a limited dollar correction. USD/JPY retreated slightly from a fresh 24-year high at 137.75 to trade around 137.25.

Swiss sight deposits decline further in the latest week which suggested no National Bank intervention to curb franc gains. EUR/CHF dipped sharply to 0.9870 while USD/CHF posted net gains to 0.9835.

Sterling was unable to make headway, especially with fragile risk appetite. GBP/USD dipped to fresh 2-year lows at 1.1860 while EUR/GBP edged lower on the day to 0.8440. Dollar strength undermined commodity currencies.

AUD/USD retreated sharply to 25-month lows at 0.6715 before attempting to stabilise. The Canadian dollar showed some resilience, but USD/CAD settled just above 1.3000.

Economic Calendar

10:00German ZEW Survey (Current Situation) (JUL)-27.6
10:00German ZEW Survey (Economic Sentiment)(M/M)(JUL)-28
10:00EUR Euro-Zone ZEW Survey (Economic Sentiment)(JUL)-28
12:00OPEC Monthly report

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.