British Pound Strengthens After CPI

The US dollar fell against its major trading partners early Tuesday, except for a gain versus the pound, ahead of a busy economic release day, starting with retail sales and import and export price data for May and the New York Federal Reserve's services reading for June, all at 8:30 am ET.

Weekly Redbook same-store sales data are due to be released at 8:55 am ET, followed by industrial production data for May at 9:15 am ET, business inventories data for April and the National Association of Home Builders' builder sentiment reading for June at 10:00 am ET.

The Atlanta Fed's gross domestic product Nowcast estimate for Q2 is expected to be updated around midday.

A quick summary of foreign exchange activity heading into Tuesday:

rose to 1.1572 from 1.1555 at the Monday US close but was below a level of 1.1578 at the same time Monday morning. Eurozone economic sentiment rose more than expected in June, according to data released earlier Tuesday. The next European Central Bank meeting is scheduled for July 24.

fell to 1.3571 from 1.3575 at the Monday US close and 1.3584 at the same time Monday morning. There are no UK data on Tuesday's schedule. The next Bank of England meeting is scheduled for Thursday when no change in interest rates is expected.

fell to 144.5786 from 144.8605 at the Monday US close but was above a level of 144.0351 at the same time Monday morning. The Bank of Japan decided to leave its policy rate unchanged in its post-meeting statement released Monday evening US time, as expected, but said it intends to slow its pace of bond buying to allow rates to rise. The next Bank of Japan meeting is scheduled for July 30-31. There were no Japanese data released overnight.

fell to 1.3562 from 1.3579 at the Monday US close and 1.3571 at the same time Monday morning. Canadian foreign securities purchases data for April are due to be released at 8:30 am ET. The next Bank of Canada meeting is scheduled for July 30.

Sterling falls as worries over the Israel-Iran conflict weigh on risk sentiment, Monex Europe analysts say in a note. "Recent headlines indicating potential changes to tax policies for [non-U.K.-domiciled] individuals add additional uncertainty, influencing sterling sentiment." Attention will soon pivot to Wednesday's U.K. inflation data and Thursday's Bank of England decision, they say. Until then, geopolitical developments will likely dominate, keeping sterling under pressure, they say. Sterling falls 0.1% to $1.3554. The euro rises 0.1% to 0.8522 pounds. (renae.dyer@wsj.com)

The US dollar fell against its major trading partners early Monday as the focus turns to May retail sales data Tuesday and the Federal Open Market Committee's policy statement at the conclusion of its two-day meeting Wednesday, when there is a 99.8% chance of no change in the current 4.25% to 4.50% federal funds rate range being priced into the CME's Fed Watch tool.

Monday's schedule is light, with only the New York Fed's Empire State reading for June at 8:30 am ET.

Tuesday's highlights include retail sales, import and export prices and industrial production, all for May.

Prior to the FOMC's meeting announcement Wednesday, data on home building, weekly jobless claims and oil stocks inventories are due to be released.

After Thursday's US Juneteenth holiday, leading indicators data for May are due to be released Friday.

A quick summary of foreign exchange activity heading into Monday:

rose to 1.1575 from 1.1544 at the Friday US close and 1.1496 at the same time Friday morning. Eurozone wage growth slowed in Q1 according to data released earlier Monday. The next European Central Bank meeting is scheduled for July 24.

rose to 1.3579 from 1.3564 at the Friday US close and 1.3527 at the same time Friday morning. There are no UK data on Monday's schedule. The next Bank of England meeting is scheduled for Thursday when no change in interest rates is expected.

fell to 144.0021 from 144.0342 at the Friday US close and 144.3661 at the same time Friday morning. There were no Japanese data released overnight. The Bank of Japan is expected to hold its policy rate steady in its policy statement due to be released at 10:30 pm ET Monday evening.

fell to 1.3573 from 1.3588 at the Friday US close and 1.3645 at the same time Friday morning. Canadian housing starts for May are due to be released at 8:15 am ET. The next Bank of Canada meeting is scheduled for July 30.

Sterling could rise along with U.K. government bond yields if the Bank of England delivers cautious signals about future interest rate cuts at Thursday's meeting, Capital.com's Daniela Sabin Hathorn says in a note. The BOE is widely expected to keep rates unchanged so its tone and forward guidance will be key. It could reiterate its data-dependent approach to future decisions while highlighting the risk of persistent inflationary pressures, she says. This might lift sterling and gilt yields if markets push back expectations for the timing of further rate cuts. Sterling rises 0.2% to $1.3588 but falls against the euro, which is up 0.2% at 0.8520 pounds. The 10-year gilt yield rises one basis point to 4.561%, according to Tradeweb. (renae.dyer@wsj.com)

The US dollar rose against its major trading partners early Friday before the release of the preliminary University of Michigan consumer sentiment reading for June at 10:00 am ET.

The dollar received haven support after Israel struck nuclear sites in Iran Thursday.

The St. Louis Federal Reserve bank is expected to update its gross domestic product Nowcast estimate around midday.

Federal Reserve officials are in their 'quiet period' ahead of the next Federal Open Market Committee meeting June 17-18.

A quick summary of foreign exchange activity heading into Friday:

fell to 1.1501 from 1.1577 at the Thursday US close and 1.1594 at the same time Thursday morning. Eurozone industrial production fell in April, slowing the year-over-year growth pace, while the Eurozone trade surplus narrowed in the same month, according to data released earlier Friday. European Central Bank policy board member Frank Elderson is due to speak at 11:00 am ET. The next European Central Bank meeting is scheduled for July 24.

fell to 1.3529 from 1.3604 at the Thursday US close and 1.3595 at the same time Thursday morning. There are no UK data on Friday's schedule. The next Bank of England meeting is scheduled for June 19.

rose to 144.3907 from 143.5513 at the Thursday US close and 143.4687 at the same time Thursday morning. Japanese consumer sentiment rose in June while Japanese industrial production and services purchases both declined in April, according to data released overnight. The next Bank of Japan meeting is scheduled for June 16-17.

rose to 1.3648 from 1.3604 at the Thursday US close and 1.3630 at the same time Thursday morning. Canadian manufacturing, wholesale and motor vehicle sales, all for April, are set to be released at 8:30 am ET along with Q1 capacity utilization. The next Bank of Canada meeting is scheduled for July 30.

The British pound eased toward $1.35 after hitting a three-year high of $1.363, as escalating Middle East tensions drove investors toward safe-haven assets amid fears of a wider conflict.

Overnight, Israel struck Iran’s nuclear sites and key personnel, calling the operation necessary to counter an existential threat.

Iran responded with hundreds of drones and warned of further retaliation.

Meanwhile, data showed UK GDP fell 0.3% month-over-month in April—worse than the expected 0.1% decline—partly due to a sharp drop in exports to the US following new tariffs.

Signs of economic strain and softer labor demand, highlighted by Tuesday’s employment data, have increased market expectations that the Bank of England will cut interest rates more aggressively than anticipated.

At the same time, the pound continues to benefit from broad dollar weakness amid renewed US tariff threats and signs of easing inflation in the US.