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  • richard evans

Inflation sends US dollar higher

Good morning

Only yesterday did I mention that the markets seemed to believe the Fed about transitory inflation and no rush to raise rates. Then the US inflation numbers were released, coming out much higher than expected, sending the US dollar higher. The moves took GBPUSD from 1.3860 to 1.3800 although the UK inflation data released this morning also surprised to the upside and we have seen GBP recover some of yesterdays losses, the pair now at 1.3845.

The single currency hasn’t been quite as resilient, EURUSD traded down to 1.1770 yesterday, the lowest level since early April and continues to trade a touch below 1.1800. The Euro lost against GBP as well, EURGBP finally breaking lower this morning to 0.8520 (GBPEUR 1.1735).

NZD has pushed higher overnight as RBNZ were a little more hawkish than expected, more upbeat on the economy and announcing the end of asset purchases later this month. Importantly, unlike the Fed and BoE, RBNZ expect more persistent inflation pressure to build over time. AUDNZD traded down from 1.0700 to 1.0630 while NZDUSD moves from around 0.6950 to 0.7025. Still some way from the recent highs of 0.7100 mind you.

BoC rate announcement this afternoon, I have been surprised by CAD weakness recently, it wasn’t that long ago that USDCAD looked like breaking below 1.2000 and yet here we are around 1.2500. I wonder whether we’ll see a similar hawkish surprise from BoC, the overnight 1.2450 USDCAD put costs 20 cad pips just in case.

Plenty of other decent data releases today and overnight including EU industrial production, China GDP and then UK unemployment early tomorrow morning. We also have Feds Powell testifying today, will be interesting to see if he has anything to add to the inflation story.

- 10.00 EU industrial production

- 11.00 BoEs Saunders speaks

- 13.30 US PPI

- 13.30 CAD manufacturing sales

- 13.45 ECBs Schnabel speaks

- 15.00 BoC rate announcement

- 16.15 BoC press conference

- 17.00 Feds Powell speaks

- 18.00 BoEs Ramsden speaks

- 19.00 US Fed beige book

- 02.00 AUS consumer inflation expectation

- 02.30 AUS unemployment

- 03.00 China GDP, retail sales, industrial production

- 07.00 UK unemployment

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