Handle with care

Euro surging to a two-year high as yesterday’s European Central Bank meeting continues to drive optimism for the single market.

The ECB appears to be moving toward tighter monetary policy, albeit cautiously. The move is not all that surprising, given that investors have long been calling to scale back the bank’s massive asset purchase program.

Economic expansion in the euro area does create a strong argument for scaling back some of the support from policymakers. The ECB has been aggressively buying bonds for the last two years. Now that their efforts seem to have succeeded, the euro will likely remain buoyant as the central bank begins to taper.

Probe pushes dollar lower

The US dollar fell Friday. The all-too familiar feeling of politics weighing on the greenback after the probe was expanded to President Trump’s business holdings Thursday.

The investigation into Russia’s involvement in the 2016 US elections will examine a large range of transactions associated with US President Donald Trump’s wide array of businesses. Outraged, Trump hinted at edging special counsel Robert S. Mueller out and said it would be a “violation” for Mueller to dig in to his family’s finances.

Mueller’s probe has already expanded from its original scope. It currently includes examining whether Trump obstructed justice in his dealings with former FBI Director James Comey as well as the business activities of Trump’s son-in-law Jared Kushner.

CAD kicks up

Canadian dollar looking sprightly this morning with two top-tier data releases.

Canadian retail sales doubled the pace that analysts predicted. Rising 0.6 percent in May, this was a strong headline figure. The core reading was somewhat softer, which could temper further gains as we head into the weekend.

Unfortunately, June’s inflation reading did not surprise to the upside. CPI was exactly in line with estimates, Canada’s inflation rate fell to one percent, the slowest year-over-year expansion since October 2015. This was largely thanks to a 1.4 percent fall in gasoline prices. Gas fell 1.4 percent in June after a 6.8 percent surge in May.

Core inflation that discounts volatile elements such as inflation picked up from the month before. This is a very positive signal as May’s core reading was the slowest since 1999.

CAD has gained half a cent against its US counterpart, hanging in the mid-1.25s.

EURUSD: Euro enjoying life at the top, sitting at a two-year high Friday and not looking to back down any time soon.

GBPUSD: Sterling slightly higher against the USD as the greenback remain broadly lower.

AUDUSD: Aussie dollar reversing some of this week’s gains, lower by about half a percent against the USD.

USDCAD: Canadian dollar higher against the greenback after retail sales doubled analyst estimates and inflation came in as-expected.

USDJPY: The dollar lower against the yen again on Friday, confirming a near two-week down trend to flirt with a near one-month low.