US Dollar Ends The Week as The Strongest One, Despite Weak Import Price Data

Market Reviews

The US dollar retreats slightly after import price index data, but stays the strongest major currency. US import price fell by 0.4% mom in June, below expectation of 0.1% mom. The Japanese yen is also strong. British pound and new Zealand dollar are trading as the weakest ones. European shares were higher. FTSE grew by 0.37%, DAX rose by 0.34% and CAC was up 0.38%.

Sterling remains under pressure of Brexit difficulties. US President Donald Trump criticized Prime Minister Theresa May's plans for Brexit. On Thursday, May’s government published a plan that includes free trade in goods and a common trade rule book with the EU. Trump said such a deal “will probably kill” any prospect of a US-UK free-trade agreement.

The euro fell against the US dollar, with the EUR/USD pair demonstrating a decline for the fourth consecutive session and setting new multi-day lows. Now it is aiming for an area of 11-month lows at $1.1500. A small support to the single currency was provided by the monthly report of the German Economy Ministry, in which it was noted that the economic growth intensified in May.

The report says, that in general, the indicators indicate that the economic growth in the second quarter will increase compared to the first quarter, although there remain risks associated with international trade policies.

Jon Cunliffe (BoE Deputy Governor) said in a speech today that the current overshoot in inflation, headline CPI at 2.4%, is “entirely due to imported inflationary pressure.”. The key question for the Bank of England now is “how much inflation is domestic economic pressures likely to generate over the next couple of years”. Cunliffe noted that “domestic inflation pressures, while strengthening a little are not yet established at levels consistent with inflation at target”.