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USD still king of the hill

USD still king of the hill

Yesterday saw another session of downbeat investor sentiment amid continued concerns regarding the economic outlook. Currency-wise, the dollar was on the front foot following comments from Chair Powell, who stated he believes the Fed can raise rates further without causing a recession in the US. Hawkish remarks from another Fed official, Mester, also provided some support for the greenback, as did the general risk averse tone on markets. 

Meanwhile on the data front, German HICP inflation printed below the consensus of 8.8% in June, falling to 8.2% from 8.7% in May. However, the decline was due to a number of temporary factors, most notably lower rail fares. Elsewhere, the EC sentiment indices came in slightly ahead of forecast in June. However, the releases did not greatly impact the euro yesterday.

In level terms, the firmer tone to the dollar is reflected by EUR/ USD opening this morning back near the halfway mark of $1.04- 1.05. GBP/USD is operating in and around the midpoint of the $1.21-1.22 range. EUR/GBP remains just above the 86p handle. 

As we look to the day ahead, the main release of note will be core-PCE inflation in the US. The forecast is for another slight decline in the rate, to 4.8% in May. US personal income and consumption data for May are also due. In the Eurozone, the unemployment rate is projected to remain at a record low of 6.8% in May.

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