FOREX: US Dollar Trades Volatile as CPI Jumps
The dollar moved sharply higher Tuesday after the US June CPI data showed that inflation growth remained brisk for a third straight month, pushing the DXY up to 92.73 from 92.31 before drifting lower later in the day and then rebounding slightly into the close.
Despite the stronger-than-expected 0.9% increase in consumer prices, which pushed the year-over-year rates even higher, markets held tight to the Federal Reserve’s contention that the elevated levels of inflation are transitory, and yields moved lower.
Likewise, the markets await Fed Chair Jerome Powell’s testimony over the next two days, as well as other key US data later in the week, before getting too far ahead of themselves.
Foreign exchange action shows that EUR-USD topped at 1.1874 in Asian trade, later slipping to 1.1833 at the US open and 1.1792 after the US CPI data before turning up to 1.1830 as Treasury yields declined.
A poorly received 30-year reopening auction pushed yields and the dollar higher into the close. While the US inflation data was stronger than expected, CPI data out of Germany showed a slowdown in inflation.
GBP-USD fell to a low of 1.3801 after the CPI data, then moved higher to 1.3850 before slipping into the close, the same pattern seen with EUR-USD.
The UK will release its consumer inflation data on Wednesday, which expectations for the year-over-year rates to hold steady within the range of Bank of England projections.
USD-JPY steadied near 110.30 after rising from 110.20 to 110.55 following the US CPI reading. The Bank of Japan is likely to revise its growth forecasts lower at its policy meeting this week but will keep its policy settings unchanged.
USD-CAD rallied after CPI, pushing the pair up to 1.2540 from 1.2470 before the data.
Elevated oil prices and a Bank of Canada meeting Wednesday that is expected to produce another tapering suggests a downside risk for the pair over next few sessions.
FOREX: US Dollar Trades Volatile as CPI Jumps
