US Dollar (USD) Slumps following Softer CPI
The US Dollar (USD) crashed yesterday afternoon after US inflation slowed for the fifth consecutive month, easing more than markets expected. Headline inflation cooled from 7.7% in October to 7.1% in November, versus the forecast 7.3%.
With the Federal Reserve’s aggressive interest rate rises seemingly having an effect, markets scaled back expectations for further hikes. As a result, USD faced a sharp repricing.
Turning to today, the ‘Greenback’ could be muted ahead of the Fed interest rate decision this evening. If the US central bank signals a change in policy approach heading into 2023, USD could slide further.
Pound (GBP) Trades Widely on Mixed Jobs Data
The Pound (GBP) traded in a wide range yesterday after mixed UK jobs data. Signs of rising unemployment hurt Sterling while rising wage growth prompted a slight uptick in Bank of England (BoE) interest rate rise expectations.
Meanwhile, a risk-on market mood saw Sterling slip against its riskier rivals and firm against its safer peers.
The Pound is so far stuck in a narrow range this morning, after the UK’s latest consumer price index reported UK inflation cooled more than expected last month.
Euro (EUR) Slips despite Positive German Data
The Euro (EUR) initially softened yesterday, despite a strong recovery in Germany’s ZEW economic sentiment index, as an improving market mood weighed on the safer single currency.
EUR was able to rise against some of its weaker peers in the afternoon, however, thanks to the Euro’s negative correlation with the US Dollar (USD), which suffered a heavy sell-off.
Later this morning, the Eurozone’s industrial production data for October could dent the common currency. Economists expect factory production to have slumped by 1.5%.
Canadian Dollar (CAD) Drops in Tandem with Bond Yields
The Canadian Dollar (CAD) fell sharply yesterday as the softer US inflation rate reading triggered a slump in Canadian government bond yields, which in turn dragged the ‘Loonie’ lower.
Looking ahead, the commodity-linked ‘Loonie’ could trade in relation to oil prices. In the evening, the Fed decision could also impact CAD.
Australian Dollar (AUD) Muted in Cautious Trade
The Australian Dollar (AUD) traded in a narrow range overnight on Tuesday as investors were reluctant to take a bet of the risk-sensitive currency ahead of the Fed’s upcoming interest rate decision.
New Zealand Dollar (NZD) Stumbles on Downbeat Growth Forecast
The New Zealand Dollar (NZD) trended lower overnight after New Zealand’s downbeat Half Year Economic and Fiscal Update suggested the country could be facing three quarters of negative growth.