US Dollar Fluctuates following Inflation Data

US Dollar (USD) Rocked by Inflation Rate Reading

The latest US consumer price index triggered notable volatility in the US Dollar (USD) yesterday.

After US headline inflation unexpectedly cooled, USD slumped. However, the ‘Greenback’ recovered from this knee-jerk reaction, bouncing back to trade sideways overall.

An expected uptick in US PPI – an indicator of wholesale inflation – could boost the US Dollar today. Signs of persistent inflationary pressures would increase the possibility of another Federal Reserve rate rise.

Pound (GBP) Subdued Ahead of BoE Decision

After an initial upside, the Pound (GBP) softened slightly yesterday as a lack of UK economic data left GBP vulnerable to losses.

However, the downside was limited. Expectations of another interest rate rise from the Bank of England (BoE) today prevented a steeper fall for the UK currency.

Markets have fully priced in a 25bps increase from the BoE today. It remains uncertain, however, whether the bank will signal a potential policy pause or if it will leave the door open to future rate rises. If it’s the latter, GBP could soar.

Euro (EUR) Rangebound amid Mixed ECB Comments

The Euro (EUR) moved sideways yesterday, failing to recoup recent losses, amid mixed signals from the European Central Bank (ECB).

Although multiple policymakers said that future rate hikes may be needed, they also said the bank was nearing the end of its hiking cycle. One ECB official even discussed the likelihood of rate cuts next year.

Today, hawkish ECB rate setter Isabel Schnabel is due to speak. Could her comments provide EUR with some support?

Canadian Dollar (CAD) Flat as Oil Markets Subdued

Muted oil prices confined the Canadian Dollar (CAD) to a narrow range yesterday, with the crude-linked ‘Loonie’ left rangebound against most of its peers.

Oil prices are wavering again today, which may leave the Canadian Dollar rangebound once more.

Australian Dollar (AUD) Slips following Softer Chinese Inflation

The Australian Dollar (AUD) slipped overnight following a sharper-than-expected slowdown in China’s inflation rate. This raised concerns about the country’s economic recovery, which put pressure on the ‘Aussie’, as AUD often trades as a proxy for the Chinese economy.

New Zealand Dollar (NZD) Softens alongside AUD

The New Zealand Dollar (NZD) also declined last night, trimming yesterday’s gains, as the ‘Kiwi’ traded true to its positive correlation with the ‘Aussie’.

Samuel Birnie

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