The USD rose 0.15% yesterday, while the Fed’s Bowman added fresh hawkish policy commentary to the mix: “We are still not yet at the point where it is appropriate to lower the policy rate,” she said, adding that “reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2% over the longer run.” Speaking to the Economic Club of New York, the Fed’s Cook said she believes rate cuts will be needed at some point, though the timing for such a move remains unclear. “The timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks.”

Resuming its rally today, the USD is about 0.25% higher this morning, with a gauge of emerging-market currencies falling to levels not seen in nearly 8 weeks. The Japanese Yen has fallen to its lowest level since 1986 as USD/JPY crossed 160 for the first time in nearly 2 months. Intervention watch continues as Japanese authorities reinforce that they will take all possible measures as needed. Tomorrow sees a fairly heavy data slate in the US, highlighted by the final Q1 GDP reading and Q1 core PCE data.

EUR/USD fell 0.2% yesterday and is 0.25% lower today, trading over 0.5% lower than this time last week. The ECB’s Rehn gave a nod to current market pricing of ECB policy expectations, stating “If you look at market data, it implies that there would be two more rate cuts so that we would end up at 3.25% by the end of this year and, with the terminal rate — somewhere around 2.25%, 2.50% … in my view, they are reasonable expectations.” With French voters going to the polls in mere days, the ECB’s Panetta said the central bank must be ready to handle any political shocks and “use the full range of tools… Monetary policy requires a management of risks and tail scenarios, not only baselines … Political and geopolitical risks remain high, and call for awareness, flexibility and state-contingent action plans.”

GBP/USD closed flat yesterday and is down 0.3% today, trading nearly 0.6% lower than this time last week. The latest BOE decision leaned more dovish than expected, with indications that more members could vote for a rate cut at the August decision date. Indeed, implied odds of a rate cut at the August decision have remained stable above 60% since the June 20 decision. The final reading of Q1 GDP comes Friday.

USD/CAD traded flat yesterday and has risen 0.2% today, trading about 0.1% lower than this time last week. Canadian inflation reaccelerated, data showed yesterday, with the headline monthly doubling the consensus of a 0.3% rise. Year-over-year prices rose 2.9% (2.6% forecast) and core inflation measures similarly rose beyond expectation. Having made some of the better progress amongst developed nations on the inflation front, investors will likely treat the Canadian inflation miss as more a ‘bump in the road’ than a fresh trend. Regardless, implied swap odds for the July BOC decision date now sit at just 35%, down from over 60% prior to the data.

AUD/USD is an outperformer in the G10 space today after inflation data exceeded forecasts, increasing calls for a rate hike ahead. The pair gained over 0.6% after the data but has given back most of the move since on the back of broader USD strength. Australia has seen a rise in headline inflation for 3 straight readings, rising from 3.4% in February to the 4% reading for May that was just released. Swap odds imply a one-third probability that the RBA raises rates at its August meeting.