BoE’s Dhingra optimistic over inflation.

ECB President Lagarde stated that the Euro-Zone had entered a new inflation phase which could linger for some time. She was particularly concerned over the labour market with workers attempting to regain purchasing power. In this context, she added that it is  unlikely that, in the near future, the bank will be able to state with full confidence that interest rates have peaked. ECB sources suggested that there was little chance of a pause in rate hikes in July or September given stubborn inflation pressures.

US consumer confidence increased more substantially than expected with a jump to 19.7 for June from a revised 102.5 previously and above consensus forecasts of 104.0.

There were net gains in the current situation and expectations components with improved confidence in the labour market also in evidence.

Bank of England MPC member Dhingra stated that wages are responding to inflation with a lag. She added that the latest producer prices data is promising, especially as the PPI data is a promising leading indicator of retail inflation. She added that there is a lag between PPI falls of one or two quarters.

UK gilts lost further ground on Tuesday with the 2-year yield hitting a fresh 15-year high above 5.25%.

Japanese vice Finance Minister for International Affairs Kanda stated that appropriate action will be taken against excessive currency moves and is monitoring moves with a sense of urgency.

Canadian consumer prices increased 0.4% for May with the year-on-year inflation rate dipping to 3.4% from 4.4% and in line with expectations.

The core rate declined more than expected to 3.7% from 4.1% and compared with expectations of 3.9%.

The monthly Australian data was weaker than expected with the annual decline declining to 5.6% from 6.8% and well below expectations of 6.1%. The trimmed mean inflation rate declined to 6.1% from 6.7%.

The ECB Sintra monetary policy conference will continue on Wednesday. The rhetoric will continue to be watched closely, especially with comments from Federal Reserve, Bank of England and Bank of Japan officials as well as the ECB council members.

The Euro was resilient in early Europe on Tuesday with EUR/USD holding above 1.0900. Hawkish ECB rhetoric underpinned the Euro during the day. EUR/USD moved above 1.0950 as the Euro held gains on the crosses. EUR/USD settled just below 1.0950 on Wednesday.  Headline US durable goods orders beat expectations with core data in line.

Higher US yields and gains for equities undermined the yen. USD/JPY posted fresh 7-month highs above 144.00. USD/JPY held near 144.00 on Wednesday with the intervention threat curing yen selling.

The Swiss franc lost ground amid firmer equities and higher global yields. EUR/CHF settled just below 0.9800 with USD/CHF retreating to 0.8930.

Sterling was supported by higher yields, but struggled to make headway on the crosses.  GBP/USD advanced to 1.2750 before settling around 1.2725, EUR/GBP advanced to just above 0.8600.

The Australian dollar secured a net advance on Tuesday, but failed to hold intra-day highs.  AUD/USD settled below 0.6700. AUD/USD posted sharp losses to below 0.6650 after the Australian inflation data.

Weaker than expected core inflation data undermined the Canadian dollar.  USD/CAD advanced to 1.3190 before a limited correction and traded above 1.3200 on Wednesday.

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