US Dollar (USD) Plunges as CPI Dents Fed Rate Rise Bets
The US Dollar (USD) slumped yesterday after US headline inflation cooled more than expected, dropping a full percentage point from 6% to a near two-year low of 5%.
Although core inflation edged up, as expected, economists highlighted that this was due to a lag in services and rent inflation. Overall, inflation is slowing down, easing pressure on the Federal Reserve to raise interest rates.
Looking ahead, if US jobless claims tick higher and monthly producer inflation flatlines then a further pullback in Fed bets could see USD slide.
Pound (GBP) Weakens amid Northern Ireland Worries
The Pound (GBP) fell during yesterday’s session, with fresh political jitters around the situation in Northern Ireland perhaps troubling GBP investors.
Comments from Bank of England (BoE) Governor Andrew Bailey lent Sterling some support in the afternoon. Bailey reiterated that the UK banking sector is strong, while saying that recent financial turmoil would not derail the bank’s monetary policy plans.
Sterling could face headwinds today following the latest GDP data. The UK economy flatlined in February, rather than rising by 0.1% as expected, as strike action weighed on growth.
Euro (EUR) Firms amid ECB Comments and USD Weakness
The Euro (EUR) enjoyed modest support yesterday morning following comments from European Central Bank (ECB) policymaker Francois Villeroy de Galhau on Tuesday night. The rate setter highlighted the risks of entrenched inflation, prompting expectations of more rate rises.
EUR benefitted from further tailwinds in afternoon thanks to the currency’s negative correlation with the US Dollar.
Turning to today’s session, Eurozone industrial production is in focus. Could a forecast 1% rise see EUR gain ground?
Canadian Dollar (CAD) Stumbles amid BoC Decision
The US Dollar selloff dragged the Canadian Dollar (CAD) lower yesterday, due to CAD’s positive correlation with USD. The Bank of Canada’s (BoC) dovish interest rate decision kept the ‘Loonie’ subdued through the session.
This afternoon, BoC Governor Tiff Macklem is due to speak. If he strikes a dovish tone, CAD could face renewed pressure.
Australian Dollar (AUD) Climbs amid Upbeat Jobs Data
The Australian Dollar (AUD) jumped overnight after stronger-than-expected employment data boosted the ‘Aussie’.
New Zealand Dollar (NZD) Lifted by Risk-On Mood
After a lacklustre overnight session, the risk-sensitive New Zealand Dollar (NZD) rose in early morning trade thanks to an upbeat market mood.