North American FX Open - Dollar still under pressure after US CPI

The market continues to digest yesterday's slower than expected US CPI report for June and the likelihood now of a first Fed rate cut in September. Overnight, the Fed's Goolsbee added to his approval of yesterday's data, saying that recent inflation data has been pretty favorable and that more data like the last two months would boost confidence. Yesterday Goolsbee said that the latest inflation data was 'excellent,' adding the figures provided the evidence he's been waiting for to be confident the Bank is on a path to its 2% goal. Daly said some adjustment to interest rates may be warranted though stopped short of offering a specific timeline for cuts and Musalem suggested he needed some more convincing to lower borrowing costs.

Usd/Jpy heads into the NA Open back up above 159.00 after an extremely choppy start to the Asian session, which saw the pair briefly dip below the 158 level again, with the Nikkei reporting that the BoJ were checking rates in Eur/Jpy.

Bbg estimate that Japan spent around Yen 3.5 trillion yesterday after the US CPI figures, its third bout of intervention this year.

The latest performance by President Biden did little to dampen speculation that he might not be the Democratic nominee. At a press conference to mark the end of the NATO summit, Biden spoke lucidly at times, but earlier he introduced Ukrainian President Zelensky, as "President Putin."

Overnight, China's trade surplus soared to the highest since at least 1990 in June at Usd 991.bln, as exports jumped more than expected at 8.6% y/y while weak domestic demand meant imports unexpectedly weakened, at -2.3% y/y.

The Swedish inflation report for June certainly supports the theory that the Riksbank can deliver three more interest rate cuts this year rather than two.

The CPIF reading came in flat in June, meaning that the y/y figure fell by a full one percentage point to 1.3% y/y. The consensus forecast had been expecting a 1.6% y/y reading. Elsewhere the headline reading fell to 2.6% y/y from 3.7% y/y and CPIF ex energy slowed to 2.3% y/y from 3% y/y.

Attention now turns to today's update on US pipeline inflation, the PPI print for June. There is also the release of the latest UMich survey.

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