Today, the USD is gaining ground on its key rivals, the euro, pound, and yen.
The June inflation numbers released the day prior continue strengthening the US dollar. The consumer price index hit 9.1% percent, which was higher than the expectation of 8.8 percent and the highest level since 1981. These data may compel the Fed officials to increase rates by a percentage point at their meeting. This possibility was acknowledged by Raphael Bostic, president of the Federal Reserve Bank (FRB) of Atlanta, following the release of inflation figures. We further point out that the US Fed's Beige Book report shows that American business anticipates continued, significant price growth for at least the remainder of this year.
Today, information about the US labor market was released, and it showed mixed results: while the total number of people receiving unemployment benefits decreased from 1.372K to 1.331K, the number of initial applications for benefits increased by 244K, exceeding both the forecast of 235K and the previous figure of 235K.
Today, the euro is dropping versus the US dollar, rising against the yen, and pairing with the pound has shaky characteristics.
Investor focus is on the European Commission's publishing of revised economic growth and inflation predictions, which came in below expectations. In place of the earlier projection of 2.7 percent, the commission's experts now predict that the eurozone's GDP will increase by 2.6 percent this year. Since the effects of the Ukrainian conflict and rising energy costs will put even greater pressure on the European economy, growth could be 1.4 percent rather than 2.3 percent next year.
The prognosis for GDP growth for the entire European Union, including the non-euro region, has not changed this year and maybe 2.7 percent; but, next year, it is possible that the increase will only be 1.5 percent rather than the predicted 2.3 percent. Additionally, experts expect that instead of 6.1 percent this year, inflation in the euro area will be 7.6 percent and will decline to 4.0 percent instead of 2.7 percent the following year. Brussels also emphasized the dangers of a resurgence of the coronavirus pandemic and cautioned that headline inflation might increase considerably more if gas supplies from Russia were cut off. The immediate outlook for the European economy is often viewed as bleak.
The country of the UK
Today, the pound is rising against the yen, falling against the US dollar, and having a shaky relationship with the euro.
Investors are still interested in the contest between Conservative Party candidates vying to succeed Boris Johnson as British Prime Minister. Rishi Sunak, a former finance minister, had previously won the first round of voting. However, Liz Truss, the foreign secretary, and Penny Mordaunt, the minister of trade policy, still have a chance to win together. It should be noted that all of the leading contenders for the position of premier are pledging tax cuts in one way or another, which disturbs experts who think such a move could cause inflation to accelerate further.
Additionally, the availability of secured and unsecured loans is anticipated to decrease over the next three months, with default rates rising due to ongoing price increases and a general decline in living standards, according to the Bank of England Quarterly Credit Report published today.
The yen is losing ground to its primary rivals, the USD, the euro, and the pound.
As a result of rising commodity and energy prices, disruptions in the supply of components, and quarantine measures implemented in China due to the coronavirus epidemic, Japan's May industrial production data showed a meager 7.5 percent fall. We also take note of Hirokazu Matsuno, Chief Cabinet Secretary of Japan, who stated that the country is troubled by the recent strong depreciation of the yen and that it will closely cooperate with the Bank of Japan to monitor the foreign exchange market.
Investors are also concerned about a recent worsening of the epidemiological condition in the greater Tokyo area. Authorities have cautioned individuals to exercise caution as the latest coronavirus outbreak gains momentum. If the situation worsens, more quarantine regulations might be implemented, putting additional strain on the economy.
The Australian dollar is now losing versus the US dollar, rising against the yen, and pairing with the euro and pound has shaky dynamics.
Investors are paying attention to the release of June employment statistics from Australia, which came in better than expected:
l Full-time employment increased by 52.9K
l The unemployment rate dropped from 3.9 percent to a record 3.5 percent, the lowest in 48 years
l Employment increased by 88.4K instead of the anticipated 30.0K
Given that the labor market has so far effectively resisted the Reserve Bank of Australia's tightening of monetary policy, these figures are expected to increase the authorities' resolve to keep raising interest rates.
Today's oil prices remained down.
The latest data from the American Petroleum Institute (EIA) put pressure on the price, showing that oil inventories in the USA immediately increased by 3.254M barrels instead of the anticipated reduction by 0.154M barrels. In comparison, distillate inventories rose by 2.668M barrels, and gasoline inventories increased by 5.825M barrels. We also take note of the comment made by the International Energy Agency (IEA), whose representatives observed that the global oil market is generally quite unpredictable and is "walking a tightrope" between a supply deficit and the risk of a recession.