USD

The dollar was able to hold its ground as traders are pricing in a relatively upbeat FOMC statement.

 A rate hike of 0.25% is widely expected but the Fed might hint that they could slow down their pace of tightening later this year. Also, the focus could be on balance sheet adjustments, which would lessen the need to hike interest rates soon. US CPI and retail sales are also due.

EUR

The euro had a mixed run as returned most of its intraday gains to commodity currencies. Data from the region was downbeat, with German WPI down 0.7% instead of gaining 0.2% and the ZEW economic sentiment index dropping from 20.6 to 18.6 instead of improving to the 21.6 consensus. German final CPI and euro zone industrial production are due next.

GBP

The pound had a boost from stronger than expected UK CPI, spurring expectations of an upbeat BOE statement. Headline inflation rose from 2.7% to 2.9% while core CPI advanced from 2.4% to 2.6% instead of dipping to 2.3%. There have also been talks of a coalition formed between the Tories and DUP. Jobs data is due next and claimants could come in at 12.5K while the average earnings index could hold steady at 2.4%. 

CHF

The franc was able to score some wins as risk sentiment improved in Europe. There were no reports out of the Swiss economy and none are due today so market sentiment could be the main driver of price action.

JPY

The yen gave up some ground as risk appetite improved and data from Japan turned out weaker than expected. The BSI manufacturing index fell from +1.1 to -2.9 instead of improving to the projected +1.5 figure. The revised industrial production report is due next and an upgrade from 4.0% to 4.1% is expected.

Commodity Currencies (AUD, NZD, CAD)

The Aussie was under some selling pressure after iron ore prices tumbled again but it recovered as risk sentiment improved later in the day. The Loonie continued to advance against its peers on hawkish remarks from BOC officials and the lack of negative reports in the oil market. Chinese industrial production, retail sales, and fixed asset investment are due next. New Zealand will release its GDP in the next Asian session.

By Kate Curtis from Trader’s Way