Forex Market Poised for Key US Economic Data

Quick Overview

US CPI data release and Federal Reserve’s monetary policy decisions, including the revised SEP, are approaching.
Despite daily gains, the US Dollar struggles to maintain momentum; US Treasury’s 10-year bond yield dropped over 2%.
AUD/USD shows upward momentum, while USD/JPY trades sideways. Japan’s PPI increased by 0.7%.
UK’s GDP growth is stagnant with declines in industrial and manufacturing production; GBP/USD trades below 1.2750.
EUR/USD under bearish pressure below 1.0750; gold modestly recovered above $2,310.
Post-election, the rupee shows choppy trading; significant forward contract activity by importers and exporters.

On Wednesday, June 12, the forex market is poised for significant movements as key economic events unfold. The US Bureau of Labor Statistics plans to release the Consumer Price Index (CPI) data for May, while the Federal Reserve will announce its monetary policy decisions and publish a revised Summary of Economic Projections (SEP).

US Dollar Steady On The Forex Market Despite 2% Bond Yield Drop

The US Dollar remains steady with daily gains, yet it struggles to maintain bullish momentum. The US Treasury’s 10-year bond yield has experienced a substantial loss exceeding 2%, reflecting market apprehensions. Wall Street indices present a mixed picture, indicative of investor uncertainty.

US CPI Expected at 3.4%; Fed Rate Unchanged

Forecasts for the US CPI suggest an annual rate of 3.4%, mirroring April’s figure. Monthly expectations include a modest 0.1% increase in the overall CPI and a 0.3% rise in core CPI. Despite these figures, the Federal Reserve will likely keep the policy rate unchanged at 5.25%-5.5%.

Asian Forex: AUD/USD Up, Japan PPI Beats Forecast

In Asia, the Australian Dollar (AUD/USD) is slightly above 0.6600, showing upward momentum during the Asian trading session. Conversely, the USD/JPY pair is trading above 157.00, exhibiting a sideways grind. Japan’s Producer Price Index (PPI) showed a 0.7% monthly increase, surpassing market expectations of 0.4%.

UK GDP Stagnant; Industrial Output Down 0.9%

The UK economy reports stagnant GDP growth for the month, with industrial and manufacturing production declining by 0.9% and 1.4% respectively. The GBP/USD pair is trading slightly below 1.2750. Moreover, the EUR/USD pair remains below 1.0750, under bearish pressure. Meanwhile, gold has modestly recovered, standing above $2,310.

Indian Rupee Swings: Rally and Decline Analysis

The Indian Rupee exhibits choppy trading post-election, with importers and exporters actively engaging in forward contracts. Importers have increased their contracts by 70% year-over-year to $9 billion, while exporters have maintained their $6 billion contracts. The rupee rallied to 82.9475 post-exit polls but declined to 83.53 after the official results, with the Reserve Bank of India intervening regularly to prevent it from breaching 83.5750.

Analysts noted that two things were responsible for the pickup in hedging: one was the perceived increase in the political risk premium, and the other, which was more important, was the range that the rupee itself made. They also added that the rupee’s rally on Monday was an opportunity for importers and the decline after that for exporters. These movements underscore the intricate dynamics of the forex market, driven by economic data, central bank policies, and geopolitical developments.

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