US Dollar Remains Firm, Sends Yuan, Rupee, Sterling And Kiwi To New 2018 Lows

Sterling traded heavily, having fallen to $1.3065 and was not helped by BOE's Cunliffe's concern about how highly indebted households will cope with an economic downturn. He did not sound as if he was prepared to hike rates as early as August. Sterling is likely to find support ahead of the $1.30 psychologically important level. 

The Canadian dollar is consolidating yesterday's losses. Many investors heard a dovish Poloz yesterday. He did reiterate the uncertainty over trade and the impact of new mortgage lending rules, but at the same time, he noted that the market understood its May statement in which it seemed to signal the likelihood of a rate hike. US dollar support is seen in the CAD1.3265-CAD1.3280 area.

Italy and Spain have reported preliminary June inflation figures, and German states are releasing their estimates ahead of the national figures out later today. Spanish and Italian consumer pressures rose. In Spain, CPI rose 0.2% on the month for a 2.3% year-over-year pace. This is up from 2.1% in May. Italy reported a 0.3% increase for a 1.5% year-over-year pace, up from 1.0% in May. German states suggest the headline pace for the nation may slip to 2.1% from 2.2%. While most states do not break out the core rate, Saxony does, and it slipped to 1.4% from 1.6%, which could blunt the impact of the headline staying above 2.0%. 

However, with the ECB rates on hold for another year, the high-frequency economic data in the near-term may not have much impact beyond the headline reaction. The focus shifts to the EU Summit that begins today. Immigration and EU economic reforms are high on the agenda, but the UK's May is expected to be chastised by the EU for the slow progress on Brexit. The Irish border, as we have suggested, remains an intractable situation. The next window of opportunity may be the July 6 UK cabinet meeting.

Oil prices are consolidating yesterday's surge. The US reported a much larger drawdown of crude inventories, which came as the US pressures others to stop buying any oil from Iran starting in November. Also, the largest tar sands field in Canada had some outages and supply from Libya is weaker than expected. The EIA reported a 9.9 mln barrel draw of US inventories. US crude stocks were expected to have fallen by six mln barrel decline. In the past three weeks, US inventories have fallen by nearly 20 mln barrels, which appears to be the largest in years. Meanwhile, US oil exports spiked to 3 mln barrels a day. 

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Read more by Marc on his site Marc to Market.

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