Powell cements expectations of July rate......>

FOREX: Powell cements expectations of July rate cut

-Fed chair Powell's testimony to Congress erred on the dovish side of the Fed's

recent communiques, highlighting the risks to the US economic outlook from

global trade tensions and increased uncertainty surrounding the timeline for

inflation to return to 2%. This resulted in the greenback sliding sharply,

boosting EUR/USD to the week's highs and placing the short-end of the US curve

under further pressure. CME's Fedwatch tool now sees a near 30% chance of a

50bps cut in July, up from ~3% ahead of the close Tuesday.

-CAD followed the greenback lower as the Bank of Canada kept policy unchanged

and echoed Powell in highlighting trade tensions as the 'biggest wild card' for

the Canadian economy. USD/CAD rallied to two-week highs upon release, before

being countered by the softer greenback. Elsewhere, BRL rallied to multi-month

highs as belated pension reform voting in the lower house looks set to begin.

-Focus turns to the second half of the Powell testimony (statement to be the

same, but Q&A different) as well as US CPI, ECB June accounts and a litany of

Fed speakers.