Kantox currency update: dollar plunges ahead of the U.S. inflation data
The dollar has dropped sharply across the board to hit 15-month lows against the Japanese yen, as the investors brace for the U.S Consumer Prices Index data, due later today, with the market sentiment still shaky after last week’s sell off in global equities.
EUR/USD extends recovery and approaches 1.2200. The euro extended its recovery from Friday’s lows at 1.2200, favoured by the positive sentiment in equity markets, to pare last week’s losses and reach levels close to 1.2400. At London market opening times, the EUR/USD is trading at 1.2365.
GBP/USD rebound from 1.3760 reaches 1.3900. The pound advanced on Tuesday, after stronger than expected UK inflation figures, which support the Bank of England’s call for an interest rate hike in the coming months and have boosted the pound to levels above 1.3900. At London market opening times, the GBP/USD is trading at 1.3985.
USD/JPY dives to test key support at 107.35. The dollar dropped sharply on Tuesday, despite the recovery in the market sentiment, to test levels below 107.30, which is the lowest USDJPY rate since November 2016, and a key support level for the dollar. At London market opening times, the USD/JPY is trading at 107.40.
In the Calendar Today
At 10:00 GMT we will be attentive to the Eurozone Gross Domestic Product, which according to the advanced estimations, will show a 2.6% growth in U.S. economy. Unless there is a revision of these figures, we do not expect a relevant impact on the euro.
At 12:30 GMT the main event today will be the U.S. Consumer Prices Index data. With the market especially sensitive about the possibility of the Fed adopting a more aggressive rate hike path, a strong inflation reading might increase buying pressure on the dollar.
At the same time, the U.S. Census Bureau will release the U.S. retail sales data. Even tough te CPI will be the main event today, consumption is still an important contributor of U.S. GDP and in that sense, a strong retail sales reading extends to have a positive impact on the dollar and vice-versa.
10:00 GMT EZ: Gross Domestic Product (YoY) (Q4)
Previous: 2.6% Expected: 2.7%
12:30 GMT U.S: Consumer Prices Index (YoY) (Jan)
Previous: 2.1% Expected: 1.9%
12:30 GMT U.S: Retail Sales (MoM) (Jan)
Previous: 0.4% Expected: 0.2%