The US dollar is predominantly stronger today, yet remains largely confined within the established ranges observed recently against the majority of G10 currencies. The news stream is relatively sparse; however, the United States has intensified its military actions against Iran, and August WTI has returned to approximately $80 per barrel. The eurozone’s May industrial output experienced an unexpected decline, whereas Japan’s May industrial output was revised downward, although there was an improvement in service sector activity. China’s Q2 GDP figures fell short of expectations, although retail sales and industrial output in June showed stronger performance than anticipated. Earlier this month, the US reported disappointing jobs growth in June, and yesterday revealed a softer than expected June CPI. Following the comments from Federal Reserve Governor Waller on Monday, which appeared to be hawkish, speculation has intensified regarding a potential rate hike at this month’s FOMC meeting. Following the release of the CPI, the probabilities were reduced by more than fifty percent. Fed Chair Warsh upheld his hawkish stance and dedication to reducing inflation during his testimony before Congress yesterday. He is set to return to provide testimony before the Banking Committee today. The questions may vary, yet the responses will consistently align.

On July 2, the euro rebounded from $1.1375 to $1.1475 following the lacklustre US employment figures for June and has maintained that range since then. With the assistance of a softer than anticipated US CPI, the euro transitioned from the lower end of the range to the upper end. Yesterday’s favourable price action was overshadowed by the euro’s failure to establish a position above Monday’s high (~$1.1445) and the 20-day moving average (~$1.1415 today). So far today, it is exhibiting a limited trading range. The euro has remained beneath yesterday’s peak, trading down to nearly $1.1410 late in the European morning. Options for approximately 845 million euros at a rate of $1.1420 are set to expire today. Yesterday, the dollar remained largely within the confines of Monday’s trading range against the Japanese yen. The dollar remained within a narrow range of approximately 40 ticks on either side of JPY162.00. It currently resides within that range, yet appears ready to surpass the high observed yesterday.

The 40-year high was recorded on July 1 near JPY162.85. Finance Minister Katayama appears resolute in his efforts to stimulate domestic demand for Japanese bonds, as the current higher yields have yet to prove adequate. Sterling fluctuated within a narrow band yesterday, oscillating between approximately $1.3340 and $1.3445. It stalled in front of last Friday’s high. It concluded the day with a stronger position, yet remained beneath the $1.3400 mark. It is currently operating within a 20-tick range on either side of $1.3400 today, with options amounting to approximately GBP640 million set to expire. However, it appears poised to extend the range downward. The euro experienced a decline in nine of the last ten sessions leading up to this week against the euro, yet it marked its first consecutive gain in almost a month. It remains relatively stable today.

The Canadian dollar experienced an increase of nearly 0.70% yesterday, marking its most significant performance since the conclusion of April. The US two-year premium, which exhibited an upward trend in May and June and was closely followed by the exchange rate, has decreased by nearly 10 basis points since the beginning of the month, with approximately half of this decline attributed to the softer US CPI. The US dollar experienced a modest decline, trading just below CAD1.4050, marking its lowest point since June 17 (Fed Day). It declined to CAD1.4040 today but has rebounded in the European morning, approaching CAD1.4070. Initial resistance is observed in the CAD1.4080-CAD1.4100 range. The Australian dollar rebounded from the dip below $0.6920 and reached slightly above $0.6990 following the release of the US soft inflation report. That represents a three-week high and marks the highest settlement since June 22. It continues to exert pressure against the high today. Nearby resistance is observed in the $0.7000-$0.7020 range.