Major currency pairs fluctuated in relatively tight ranges throughout the week as investors tried to figure out how central banks will continue to battle inflation in face of heightened recession risks. The European economic docket will feature the IFO business sentiment data for Germany on Friday. In the second half of the day, the University of Michigan will release the final revision to the June Consumer Sentiment Index and the US Census Bureau will publish the May New Home Sales data. Investors will keep a close eye on comments from central bank speakers ahead of the weekend.
The US Dollar Index moves sideways above 104.00 and the 10-year US Treasury bond yield holds above 3% after having declined in the previous two days. US stock index futures are up between 0.4% and 0.7%, pointing to a slightly upbeat market mood.
While testifying before the House Financial Services Committee, FOMC Chairman Jerome Powell reiterated that they have an "unconditional commitment" to fighting inflation. "We are trying to moderate demand so inflation can come down," Powell added but further noted he was still expecting growth this year to be fairly strong. Meanwhile, Federal Reserve Governor Michelle Bowman said on Thursday another 75 basis points (bps) rate increase in July and at least 50 bps of hikes at the next few meetings would be appropriate.
EUR/USD erased Wednesday's gains on Thursday but didn't have a difficult time holding above 1.0500. "If monetary policy falls behind the curve, even stronger hikes in interest rates could become necessary to get inflation under control," European Central Bank (ECB) Governing Council member Joachim Nagel said on Wednesday.
GBP/USD closed the second straight day virtually unchanged on Thursday and extended its sideways grind below 1.2300 early Friday. The UK’s ruling Conservative Party lost by-elections, with the loss of two Tory seats after ballots were cast in Wakefield, Tiverton and Honiton. In the meantime, the UK's Office for National Statistics revealed that Retail Sales declined by 0.5% on a monthly basis in May, compared to the market expectation for a contraction of 0.7%.
USD/JPY continued to push lower after having closed below 135.00 on Thursday. The data from Japan showed that the National Consumer Price Index stayed unchanged at 2.5% on a yearly basis in May, falling short of analysts' estimate of 2.9%. Commenting on the data, “we should pay sufficient attention to possible impact from inflations on consumer sentiment and corporate activities," Japan’s Deputy Chief Cabinet Secretary Seiji Kihara said.
Gold closed deep in negative territory on Thursday and seems to have gone into a consolidation phase above $1,820 in the European morning.