North American FX Open - Tech outage the latest blow to sentiment

It has been a week for the safe haven currencies, with the Franc, the Jpy and then the Usd, taking the top three places in the G10 currency performance table. The latest blow to global risk sentiment has been a tech outage, which has disrupted operations across multiple industries overnight, which has hit the likes of industries such as air travel and media, as well as banking and healthcare. A software update issued by CrowdStrike, a US cybersecurity company, has caused Microsoft Windows systems to crash worldwide.

The Dollar has rallied across the board, while the Euro has remained relatively supported after the ECB refused yesterday to deliver any hints that they are expecting to cut rates again in September.

An ECB sources report stated that policymakers are increasingly wondering if they may only be able to cut rates once more this year.

Muller argued that to cut again, more confidence is needed that inflation is going down to 2%, while Villeroy stated that he is watching services inflation carefully, before adding that market expectations on rates (two more rate cuts by year end) seem rather reasonable.

Simkus worried that services inflation is still very strong and also agreed with the market view for two more cuts in 2024. Finally Rehn said that he sees near-term uncertainty on the inflation slowdown.

Overnight, Japan national CPI came in softer than expected at 2.8% y/y in June, but the core rates still accelerated and the data is likely to spark continued speculation of a possible second BOJ hike at the end of the month.

UK retail sales were a major disappointment, with the headline reading falling by 1.2% m/m, compared to the fall of 0.6% that was the consensus forecast. It was however just a pullback from May's string showing, where it posted a 2.9% increase m/m.

UK GfK Consumer Confidence improved to minus 13 in July, from minus 14 in June, but that was below the forecast of minus 12.

Speculation continues to grow over whether President Biden will be the Democratic Party nominee. Bbg reported that Biden's grip on the Democratic presidential nomination appeared to be slipping yesterday, as he weighed increasingly public warnings from his party's top lawmakers, while in isolation for a Covid infection. Meanwhile, Donald Trump officially accepted the GOP nomination at his RNC speech. He described his assassination attempt as 'too painful to tell' and called for unity, tax cuts, and an end to foreign wars, as well as pledging to end the illegal immigration crisis by 'closing our border and finishing the wall'.

The data highlight today is the Canadian retail sales report for May, which is the final major update before next Wednesday's Bank of Canada meeting.

We should hear from the Fed's Williams and Bostic.

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