GBP/USD dipped below 1.2600 before stabilising around 1.2620..

German consumer prices increased 0.3% for June with the year-on-year rate increasing to 6.4% from 6.1% and slightly above expectations of 6.3%.

US initial jobless claims decline to 239,000 in the latest week from a revised 265,000 previously and below expectations of 266,000. Continuing claims also declined to 1.74mn from a revised 1.76mn the previous week. The data dampened expectations over a softer labour market.

Atlanta Fed President Bostic stated that he doesn’t see as much urgency to move on interest rates than others. He did, however, also comment that nobody should take a signal from my view that that the bank should pause. He added that there are undoubtedly scenarios where the Fed could move at two meetings in a row. The overall rhetoric was more dovish, but the pricing of a July rate hike remained around 85%.

The stronger than expected US data again helped propel the dollar stronger. After initial losses, the dollar index strengthened and posted a fresh 10-day high during the day.

The Swedish Riksbank increased interest rates by 25 basis points to 3.75% which was in line with consensus forecasts. The Riksbank Governor voiced opposition to market intervention.  The krona was unable to make any headway after the rate hike.

The latest Euro-Zone inflation data will be released on Friday.  Consensus forecasts are for the headline annual rate to decline to 5.6% from 6.1% with the core rate increasing to 5.5% from 5.3%.

The PCE prices data will be released on Friday and will be important for the Fed. Consensus forecasts are for a 0.4% monthly increase in prices with the year-on-year rate unchanged at 4.7%.

There will be significant quarter-end position adjustment on Friday and US markets are open for limited hours on Monday ahead of the July 4th holiday. This will lead to choppy trading, especially around the London fix.

The Euro posted significant gains into Thursday’s New York open with net gains after the German inflation data. EUR/USD peaked at 1.0940. There was a sharp reversal after the US data releases as US yields moved sharply higher. EUR/USD dipped to lows at 1.0860 before stabilising around 1.0870 on Friday. Higher US yields again undermined the Japanese currency.

There was further verbal intervention by the Japanese Finance Ministry. USD/JPY posted fresh 7-year highs just above 145.00 before a limited correction to 144.70.

The Swiss franc overall was little changed. EUR/CHF settled around 0.9775 with USD/CHF testing the 0.9000 level.

Sterling was held in relatively tight ranges with some resilience amid expectations of further BoE tightening. The withdrawal of bank deposits triggered fresh doubts over potential spending trends. GBP/USD dipped below 1.2600 before stabilising around 1.2620.

Commodity currencies bounced during the day with AUD/USD around 0.6620 and edging higher to 0.6630 on Friday. USD/CAD edged lower to just below 1.3250.

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