US Dollar (USD) Crashes as CPI Dents Fed Bets
The US Dollar (USD) plummeted yesterday after the latest consumer price index revealed faster-than-forecast declines in US inflation.
The headline reading cooled from 4% to 3% – its lowest level in over two years – while the core rate dropped from 5.3% to 4.8%. In response, markets reined in their expectations for more Federal Reserve rate hikes, causing USD exchange rates to slump.
Turning to today, the latest PPI reading and initial jobless claims are scheduled for release. If they show any signs that the US economy is cooling, the ‘Greenback’ could extend its losses.
Pound (GBP) Softens in Absence of UK Data
The Pound (GBP) struggled yesterday as a lack of UK economic data left Sterling vulnerable to losses.
Tailwinds following the hotter-than-forecast wage growth data on Tuesday faded. However ongoing Bank of England (BoE) rate hike bets may have prevented steeper losses.
This morning, the UK’s May GDP results came in better than expected, printing at -0.1% rather than -0.3%. Sterling could see muted movement, but the currency may have been spared a sharper selloff.
Euro (EUR) Enjoys USD Correlation
The Euro (EUR) jumped against many of its peers yesterday as the single currency benefitted from its strong negative correlation with the US Dollar.
However, the safe Euro suffered losses against its risk-sensitive peers due to an upbeat market mood.
This morning, an expected slowdown in Eurozone industrial production could put some pressure on EUR. Later in the day, the European Central Bank’s (ECB) meeting minutes are out. Could hawkish hints help the Euro climb?
Canadian Dollar (CAD) Weakens despite Hawkish BoC Hike
The Canadian Dollar (CAD) saw volatility yesterday, with the currency eventually heading lower despite another rate hike from the Bank of Canada (BoC). Although the BoC sounded hawkish following the decision, its accompanying inflation forecasts led many analysts to predict that yesterday’s rate rise was the bank’s last.
Today, Canadian data is thin on the ground. As a result, CAD could trade on its positive correlations with both USD and crude oil, potentially leading to mixed movement.
Australian Dollar (AUD) Climbs in Risk-On Trade
The risk-sensitive Australian Dollar (AUD) strengthened overnight as a cheery market mood boosted AUD’s appeal.
New Zealand Dollar (NZD) Rises amid Upbeat Market Sentiment
Likewise, the riskier New Zealand Dollar (NZD) rallied amid the bullish tone among investors.