What to watch for on Wednesday, June 22:
US Federal Reserve Chairman Jerome Powell will testify before Congress. His observations prepared in advance will be published before the event. Market traders will be looking for clues about future quantitative tightening. In addition, updated data on inflation will be released in the UK.
On Tuesday, the US dollar fell modestly against most of its rivals, amid a better market environment. The USD/JPY pair, however, soared to a fresh multi-year high at 136.61, holding close to the end of the US session. The collapse of the yen is mainly due to the Bank of Japan’s obstinacy in maintaining its ultra-loose monetary policy.
Global indices rose, with Wall Street posting significant gains and limiting demand for security. US government bond yields rose, but not enough to revive inflation concerns.
Meanwhile, central banks continue to hint at aggressive measures. The Bank of England’s chief economist, Huw Pill, said they would certainly be ready to act if they see signs of persistent price pressures. Reserve Bank of Australia Governor Philip Lowe opened the door for a 50 basis point rate hike in July. Finally, Olli Rehn, a member of the Governing Council of the European Central Bank, said that the September rate hike is very likely to be higher than the 25 basis points forecast for July.
The EUR/USD pair is trading around 1.0530, little changed on the day. GBP/USD made a modest advance and is now trading around 1.2280. The improved tone in equities helped commodity-linked currencies to gain against their US rival. AUD/USD rises to 0.6970, while USD/CAD quotes at the 1.2910 zone.
Gold is battling the $1,830 level under pressure. Oil prices were little changed on Tuesday, with WTI now trading around $109.50 a barrel.
Source: Fx Street
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