Euro still above $1 but U.S. CPI a stern test RBNZ expected to...

• Euro still above $1 but U.S. CPI a stern test
• RBNZ expected to deliver 50 bp hike, tone to drive kiwi
• Sterling adrift as markets wait for Tories to choose leader

The euro hovered a whisker above parity on the dollar on Wednesday ahead of U.S. inflation data, with traders wary a sky-high reading could force it to lows not seen in decades.

Markets are also wary of a surprise from the Reserve Bank of New Zealand, which sets policy at 0200 GMT, with economists expecting a 50 basis point interest rate hike.

The New Zealand dollar NZD=D3 , which hit a two-year low of $0.6097 on Monday and inched up to $0.6119 in early trade, is vulnerable to a further drop if the central bank's statement is focused more on risks to growth rather than inflation.

The common currency EUR=EBS , meanwhile, is down nearly 12% this year and fell as low as $1.0005 on Tuesday as war on Europe's eastern edge has triggered an energy crisis that has hurt the continent's growth outlook. It last bought $1.0030.

Economists forecast headline U.S. inflation accelerated to 8.8% year-on-year in June, a 40-year high, which is likely to reinforce expectations of interest rate hikes in response and help the dollar in a market nervous about both rates and growth.

"I think the U.S. dollar will keep increasing if the U.S. CPI is stronger than expected," said Commonwealth Bank of Australia strategist Joe Capurso in Sydney. "There's definitely a very good chance that the euro falls below parity tonight."

The euro already fell beneath parity on the Swiss franc EURCHF= last month and is flirting with a drop beneath its 200-day moving average against the pound EURGBP= .

Weakness in the euro and yen has vaulted the U.S. dollar index =USD higher and it made a two-decade peak of 108.560 this week, hovering at 108.220 in early trade on Wednesday.

The Japanese yen JPY=EBS has taken a beating this year as the Bank of Japan sticks with its ultra-easy monetary policy in contrast with tightening nearly everywhere else.

It was under pressure at 136.95 per dollar on Wednesday after hitting its lowest since 1998 on Monday at 137.75.

The Australian dollar AUD=D3 fell 0.2% to $0.6746, just above a two-year trough of $0.6712 made on Tuesday.

Sterling GBP=D3 has also slipped on the stronger dollar and analysts see it adrift in the wake of the resignation of British Prime Minister Boris Johnson last week.

It last bought $1.1877, with gross domestic product data due at 0600 GMT the next hurdle, as traders expect May brought zero growth.

Eight Conservatives are vying to succeed Johnson.

"The combination of slow growth, debt and high inflation is likely to prove very tricky for the new Tory leadership," said Rabobank senior strategist Jane Foley.

"Although sterling investors will be hoping for a government less distracted by scandal and more focused on providing coherence around the post-Brexit economy, the jury is still out.

"Sterling may suffer a lack of fresh direction until the new PM is in place."

The South Korean won KRW=KFTC was a fraction firmer in morning trade after the central bank raised interest rates by 50 basis points, in line with market expectations.

In Wellington, where the New Zealand central bank has been in the habit of surprising markets, investors are fairly sure a hike is coming and are focused on the tone of the statement.

"Our dovish scenario comprises a 50bp hike, and a statement which emphasises the downside risks to the global economy," said Westpac analyst Imre Speizer, something which he expects could knock the kiwi half a cent lower and push down near-term rates.

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	Currency bid prices at 0058 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.0030		$1.0036	 -0.07%		 -11.78%	 +1.0040	 +1.0025 
 Dollar/Yen		JPY=EBS	136.9850	   136.8200	+0.13%		 +0.00%	  +137.0400   +136.9500 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9823		 0.9821	  +0.02%		 +7.69%	  +0.9826	 +0.9819 
 Sterling/Dollar   GBP=D3	 1.1876		 1.1885	  -0.06%		 -12.18%	 +1.1889	 +1.1875 
 Dollar/Canadian   CAD=D3	 1.3032		 1.3021	  +0.11%		 +3.10%	  +1.3034	 +1.3020 
 Aussie/Dollar	 AUD=D3	 0.6746		 0.6757	  -0.16%		 -7.19%	  +0.6759	 +0.6742 
 NZ				NZD=D3	 0.6119		 0.6127	  -0.11%		 -10.59%	 +0.6128	 +0.6119 
 Dollar/Dollar																				   

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX

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World FX rates	https://tmsnrt.rs/2RBWI5E 

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