CFTC data recorded a sharp decline in long, speculative Pound Sterling positions to 18,000 in the latest week from 32,000 previously.

US PCE prices data on Friday was below consensus forecasts which eased inflation concerns slightly.  The data provided relief to risk appetite, although caution prevailed. US bond yields edged higher despite the inflation data. Wall Street equities posted net gains, although global bourses were mixed with no headway in Asia.

The dollar dipped after the PCE data but recovered from intra-day lows with marginal gains. EUR/USD was again unable to hold above 1.1950 and settled little changed. Sterling lost ground as Thursday’s Bank of England statement continued to erode support. Commodity currencies failed to hold Friday’s intra-day best levels as caution prevailed.

The German consumer confidence index strengthened to -0.3 for June from -6.9 previously and above consensus forecasts of -4.0.  Euro-zone money supply growth slowed to 8.4% in the year to May from 9.2% previously with private loans growth at 3.9% from 3.8% previously with little implications for ECB policy.

Narrow ranges prevailed ahead of the New York open with markets waiting for fresh developments on inflation and monetary policy.

The US PCE prices index increased 0.4% for May with a 3.9% increase from 3.6% previously. The core index increased 0.5% on the month, below expectations of 0.6% and after a 0.7% increase previously. The underlying annual rate increased to 3.4% from 3.1% and the highest reading since January 1992.

There was, however, some relief that the data was slightly lower than expected and the dollar moved lower following the release on reduced expectations that the Federal Reserve would have to tighten policy earlier. EUR/USD strengthened to highs around 1.1975, but failed to hold the gains and retreated below 1.1950 at the European close with markets still reluctant to chase the US currency weaker.

CFTC data recorded a sharp decline in long, speculative Euro positions to 89,000 contracts in the latest week from 118,000 previously and the lowest figure for six weeks. There will still be scope for a further reduction in longs which will tend to cap Euro rallies in the short term unless there is very dovish Federal Reserve rhetoric.

The French National Front party failed to gain a key regional seat in local elections which provided an element of Euro support, but EUR/USD was trapped close to 1.1925 on Monday as the dollar edged higher and commodity currencies edged lower. Month-end position adjustment is likely to have a significant impact during the day.

US Treasuries secured only slight gains following the US inflation data with the 10-year yield just below 1.50%. Overall risk appetite held firm which limited potential demand for the Japanese yen, but USD/JPY retreated towards 110.50 amid the wider soft tone.

The dollar secured a wider recovery later on Friday with USD/JPY strengthening to around 110.80.

Boston Federal Reserve President Rosengren stated that the US can’t afford another boom and bust cycle in the housing market and also suggested that the central bank may reach the point of debating whether substantial progress had been reached before the beginning of next year.

The latest US employment data on Friday will be important for underlying confidence in the US economy, yields and Federal Reserve commentary The US currency was unable to make headway on Monday despite a slight increase in US yields with USD/JPY around 110.65 while EUR/JPY traded just below the 132.0 level as regional equities struggled to make headway.

The CBI retail sales index strengthened to 25 for June from 18 previously and above consensus forecasts of 14 with retailers also expecting a strong performance in July. Sales were also above seasonal norms by the largest amount since November 2016 and stock levels were well below normal which will maintain strong demand from wholesalers in the short term.

The data had little impact with markets continuing to digest Thursday’s Bank of England policy statement and a paring of long positions. GBP/USD dipped back below 1.3900 with lows near 1.3870 while GBP/EUR settled just below the 1.1630 level.

CFTC data recorded a sharp decline in long, speculative Pound Sterling positions to 18,000 in the latest week from 32,000 previously. This was the lowest reading since early February which suggests underlying hedge-fund support for the Pound has weakened significantly.

There was speculation that new Health Minister Javid would back an early easing of coronavirus restrictions in order to support the economy, but the July 19th date is not expected to be brought forward and overall developments were mixed given reports that German Chancellor Merkel was pushing for a complete ban on EU travellers into the EU.

Economic Calendar

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15:30 USD Dallas Fed Manufacturing Business Index(JUN) 34.9

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