JPY trades at its lowest level to USD since 1998!

Despite a consolidating US dollar since the highs formed on the 14th of June, the Japanese Yen continued to lose ground against the greenback reaching levels of 136.50 – the highest in more than 24 years. 

Despite Japanese headline inflation now being slightly above target, the Bank of Japan defended its ultra-loose policies last week. Although it made some comments at the quickly depreciating currency, it did nothing to physically protect it, leaving it open to Tuesday's price action and risk appetite. 

Key Factors for Today

• UK Inflation today
• Markets show returning confidence on Tuesday
• However -> S&P 500 futures point down almost 1%
• As risk optimism fades away, the dollar maintains a small advance
• Prices of Crude oil are currently down by more than 3.3 percent
• Overall risk sentiment in the markets are tilted to the downside

Coming Up

• Canadian & UK Inflation
• Fed Chair Powell Testifies
• Speeches from Fed's Barkin, Evans & Harker, ECB's de Guindos & Elderson, BoC's Rogers

US dollar holds steady as risk sentiment fades away

Since Wednesday morning in Asia, the dollar has strengthened, and investors are now looking for hints about monetary policy in the testimony of the U.S. Federal Reserve Chair before Congress. The US dollar has traded in a sideways consolidation range below the highs formed around 105.80 on 15th of June as markets discounted the hawkish tone from the Federal Reserve.

Stocks back to decline, was it a dead cat bounce? 

US equity futures are now back to the negative territory as risk sentiment deteriorated. During yesterday’s cash market session, dip buyers attempted to take advantage of recent equity weakness and extremely oversold conditions to purchase beaten-down stocks in anticipation of a potential rebound in the hopes that the worst may have passed for the time being, at least until the release of the following batch of crucial economic data. But with the S&P 500 futures currently down a little more than a 1%, this could’ve been a DCB (dead cat bounce). 

Oil prices continue the move lower, key support levels in focus 

In order to lower skyrocketing fuel prices and relieve pressure on consumers, U.S. President Joe Biden is anticipated to ask Congress to temporarily suspend a federal tax on gasoline on Wednesday. In response to pressure from the White House to lower fuel costs, seven oil firms are scheduled to meet with Biden on Thursday. WTI Crude prices are currently hovering around 105.50, with the crucial support levels being 105.0 and 102.60 dollars per barrel.

Canadian Inflation numbers due today

Today sees the release of Canadian inflation data, including Core CPI. In comparison to the last estimate, which showed the Canadian CPI at roughly 6.8% annually, median forecasts for this release indicate that inflation may moderate slightly to 6.7 percent.

Fed Chair Powell Testifies

Today, Federal Reserve Chairman Jerome Powell will testify before the Senate Banking Committee on the Semi-Annual Monetary Policy Report. Since inquiries from senators and house members are unpredictable, the markets will be watching for any additional hints from Jerome Powell on upcoming monetary policy choices anticipated during the remaining months of 2022.