European FX Open - Back on board the Trump trade

It has been a positive overnight session for the DOLLAR helped by upbeat comments from Fed Chair Powell. He stated that the US economy has performed remarkably well in the last couple of years and that the labor market has moved into "better and better balance". Powell added that the last three US inflation updates have added to the Fed's confidence and that a "hard landing" is not a likely scenario. Powell went on to emphasize that the US economy is in a different place to Europe's and on the subject of his re-appointment, which is scheduled to end in May 2026, he declared that he was very happy doing the job of Fed Chair. Powell has often come under criticism from former President Trump, even though it was his appointment.

The US unit has also benefited from the increased likelihood of a return as President in November for Trump, following the weekend's unsuccessful assassination attempt, with the latest development being the choice of Ohio Senator Vance, a populist protege, as his pick for Vice President. Chatter about re-imposing tariffs on China is expected to increase, as Vance has said previously that China is the biggest threat to the US.

Eur/Usd has dipped back to 1.0888 from yesterday's trip to 1.0922, which was the pair's highest level in almost four months.

Meanwhile Usd/Jpy has enjoyed a steady bid all night, rising back to 158.79.

The debate continued to rage over when the Fed is likely to deliver their first rate cut, with Goldman Sachs yesterday declaring that the Fed has a "solid rationale" for a rate cut later this month.

The Fed's Daly added that "we're getting nearer to achieving our goals, but we're not there yet".

Today's calendar includes the German and EZ ZEW Surveys this morning, as well as EZ trade, while in the afternoon we receive US retail sales, import/export prices and the NAHB index.

North of the border, the all important June CPI report is published. The headline rate is expected to edge down to 2.8% y/y in June down from 2.9% y/y in May and the estimates for both the core measures of median and trim are also both expected to fall by 0.1% y/y.

After yesterday's Bank of Canada's Business Outlook Survey for Q2 painted another glum picture on overall sentiment, according to TD Securities, an in-line inflation reading looks set to rubber stamp the likelihood of a follow up rate cut from the BoC next week.

Also today we should hear from the ECB's Villeroy this morning and the Fed's Kugler after hours. There is also the release of the latest ECB Bank Lending Survey.

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