FX market trades cautiously ahead of US CPI

The traded higher against all major currencies on Thursday except the . The Federal Reserve is meeting and a faster removal of political accommodation is widely expected. Today confirms that the job market is hot. The number of new jobless claims fell to 185,000 last week, its lowest level since 1969. Read that again – 1969. That’s a 52-year low. Weekly claims can be very volatile, but there has been an irrefutable downward trend that reflects the tight labor market. Employers are reluctant to lay off workers when there is a shortage of willing applicants, which can be a problem for wage growth.
US inflation figures will be released tomorrow and economists expect the growth rate to slow and the annualized rate to pick up. Given Federal Reserve Chairman Jerome Powell’s recent comment that it’s time to remove the word “transient” from the central bank’s description of inflation, prices will rise at their fastest pace in 30 years with a good chance of a rise in the monthly CPI. Gasoline prices have been high throughout November, with many Americans reporting rising Thanksgiving dinner costs. Traders are cautiously buying US dollars and selling stocks ahead of Friday’s CPI report. If inflation is stronger than expected, bets on rising rates will rise, pushing the US dollar higher against , and , while pushing equities lower.
All three commodity currencies traded lower. The Canadian dollar extended its slide after the Bank of Canada said gasoline prices had recently fallen. The Bank of Canada expects to remain elevated next year and return to around 2% in the second half of the year. The rise in the dollar also led to a decline, adding pressure on the loonie. The more flexible Chinese pushed the dollar and the dollar lower. Tonight’s New Zealand will be the main focus for the NZD.
The rise in the US Dollar also broke below 1.1300. While a smaller for Germany may have contributed to this decision, the real concern is that eurozone countries will follow the UK in imposing new restrictions. The daily number of cases in the UK is at its highest level since January. This is the same month that new cases hit a record 68,000. Cases in Germany hit record highs this month, and yesterday it reported the highest daily COVID deaths since February. Calls are growing for restrictions before the Christmas holidays.
Tomorrow’s report should not have a significant impact on the euro. The British pound, on the other hand, could be affected by the monthly GDP and industrial production figures, which are both expected to be stronger. The Bank of England and investors will be eager to see if Omicron has affected its stimulus removal plans.

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