Comparing to yesterday’s European session, today’s was a rather quiet one. Remarks by the Bank of Japan Governor spurred the placing of certain positions by forex market participants early in the session. Data pertaining to Eurozone inflation, as well as releases on homebuilding activity and the University of Michigan’s survey on consumer expectations out of the US kept traders busy throughout the rest of the session.
As the European trading day was beginning, the Bank of Japan Governor Haruhiko Kuroda was attending a press conference to explain the Bank’s decision to maintain its loose stance on monetary policy. His comments on inflation needing time to reach the Bank’s target of 2%, as well as him saying it is currently not an appropriate time to discuss an exit plan to the Bank’s accommodative stance, weakened the yen. The dollar built on yesterday’s sizeable gain versus the yen to hit a fresh two-week high of 111.41 yen, though it later fell below the 111-yen level to last stand slightly lower on the day.
In terms of today’s important US data, housing starts fell for the third time in a row, reaching their lowest in eight months. Specifically, housing starts fell 5.5% relative to the previous month, standing at 1.09 million units. This was also below expectations of 1.22m. The decline in construction activity was broad-based. Building permits fell as well, declining to their lowest since April 2016. In particular, they fell 4.8% compared to April’s figure, reaching 1.17m. Projections were for 1.25m. This might hint to construction activity remaining weak in the months to follow. The dollar index posted losses as the data hit the markets with dollar/yen giving up a significant part of the gains it made earlier in the day.
The University of Michigan’s survey on consumer expectations about their financial situation and the prospects of the economy overall showed sentiment deteriorating. The relevant index in the June preliminary report declined to 94.5 from May’s 97.7, negatively comparing to expectations for a reading of 97.1. The dollar posted losses relative to major currencies including the yen and the euro upon data release.
The dollar index hit a fresh two-week high of 97.56 today but weaker-than-anticipated US data set it on a path to finish the day lower. The index was last flat on the day. Dallas Fed President and FOMC voting member Robert Kaplan is scheduled to give a speech at 16:45 GMT. His comments have the capacity to move the dollar.
Sterling extended yesterday’s gains after the Bank of England seemed to be coming closer to the first rate hike in a decade. Pound/dollar was last up for a second consecutive day, eyeing the 1.28 level.
Out of the Eurozone, the final inflation figures for the month of May were released today. On a monthly basis, inflation was at -0.1% as expected. April’s respective figure stood at 0.4%. Year-on-year, inflation stood at 1.4%, in line with expectations but below April’s 1.9%. Core inflation, the measure the European Central Bank often cites and which excludes volatile energy and unprocessed food costs, was flat month-on-month, slightly above the 0.1% contraction that was expected but below the previous month’s 0.4%. In today’s trading, the euro recovered part of the losses incurred versus the dollar yesterday, which threw euro/dollar to the two-week low of 1.1132. Euro/dollar was last up on the day four-tenths of a percent on the day, close to the 1.12 handle.
Finishing with a glance at commodities, gold was flat at $1254 an ounce in afternoon European trading hours, while WTI and Brent crude were up 0.4% and 0.6% up on the day, at $44.64 and $47.22 per barrel respectively.