US Dollar Downturn Continues on PPI Miss

US Dollar (USD) Slips as Monthly PPI Falls

The US Dollar (USD) declined yesterday amid fresh evidence that inflation is cooling in America.

The US PPI showed an unexpected 0.5% drop in producer prices from June to July. This follows a larger-than-forecast fall in headline inflation the previous day, and added to expectations that the Federal Reserve may not raise interest rates as aggressively as anticipated.

Looking ahead, the latest US consumer sentiment index from the University of Michigan may support USD. Forecasters predict it to show a second consecutive monthly rise in consumer morale.

Pound (GBP) Softens as Cost-of-Living Fears Remain

The Pound (GBP) struggled yesterday as concerns about the UK’s cost-of-living crisis kept Sterling on the back foot.

Outgoing Prime Minister Boris Johnson met with energy CEOs to discuss what more can be done about surging bills in the UK amid the country’s cost-of-living crisis. However, the meeting finished with no new announcements, and Johnson reiterated that any policy decisions are for his successor to make.

Sterling seems muted this morning after UK GDP showed a smaller-than-expected contraction, printing at -0.6% in June rather than -1.3%. Domestic responses to the data may cause some movement as the day progresses.

Euro (EUR) Firms as USD Falters

The Euro (EUR) rose against many of its peers yesterday thanks to a continued weakness in the US Dollar, as EUR is negatively correlated with the American currency.

However, ongoing worries about Europe’s energy crisis capped gains, with gas shortages threatening to push the bloc into a recession.

Today, EUR investors may take their cues from the Euro area’s latest industrial production figures. Economists expect a modest rise in output. Any surprise results could trigger sharper movement.

Canadian Dollar (CAD) Subdued despite Strengthening Oil

Trade in the Canadian Dollar (CAD) was mixed yesterday. While a rise in crude oil supported the commodity-linked ‘Loonie’, the weaker demand for USD seemed to spread to other North American currencies.

With no Canadian data set for publication today, movement in the oil market may drive CAD exchange rates.

Australian Dollar (AUD) Buoyed by Rising Commodities

The Australian Dollar (AUD) strengthened overnight, despite a mixed market mood, as stronger commodities prices boosted the resource-linked ‘Aussie’.

New Zealand Dollar (NZD) Rises on Positive PMI

The New Zealand Dollar (NZD) also gained ground in overnight trade. New Zealand’s latest PMI showed an unexpected expansion in business activity last month, thereby boosting the ‘Kiwi’.

Samuel Birnie

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