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Broad Greenback Weakness Prevails Post US CPI, NZD Surges 1.25%

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  • The greenback traded in a volatile manner on Wednesday as markets digested the latest inflation data from the US and the USD index has maintained a downward bias throughout the session. Softer-than-expected data sees the DXY down 0.65%, lower for a third consecutive session and at the lowest level since the prior inflation print on April 10. The index has also breached below the 50-dma, intersecting today at 104.77, weighed by US yields 10bp lower on the day and major equity indices surging.
  • This risk on tone of the session has been underpinned by China easing rhetoric picking up, with risk proxy currencies being the main beneficiary. This has particularly benefited the New Zealand dollar, which alongside Scandinavian FX, stands as the best performer in G10, rising around 1.25% against the greenback.
  • USDJPY is also 1% lower on Wednesday, helped back below the 155.00 mark by lower core yields. Today’s selloff should snap a three-day winning streak for the pair and leave 156.74, the May 14 high and 157.00, a Fibonacci retracement as the key short-term levels on the topside as markets continue to weigh the MoF’s potential intervention plans versus the underlying drivers of central bank policy and yield differentials.
  • The preliminary reading of first quarter growth data in Japan is due overnight, which precedes Australian. In the US, jobless claims, Philly Fed and industrial production will cross Thursday, however, markets will likely be more concerned with comments from Fed officials following the latest inflation report.
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  • The greenback traded in a volatile manner on Wednesday as markets digested the latest inflation data from the US and the USD index has maintained a downward bias throughout the session. Softer-than-expected data sees the DXY down 0.65%, lower for a third consecutive session and at the lowest level since the prior inflation print on April 10. The index has also breached below the 50-dma, intersecting today at 104.77, weighed by US yields 10bp lower on the day and major equity indices surging.
  • This risk on tone of the session has been underpinned by China easing rhetoric picking up, with risk proxy currencies being the main beneficiary. This has particularly benefited the New Zealand dollar, which alongside Scandinavian FX, stands as the best performer in G10, rising around 1.25% against the greenback.
  • USDJPY is also 1% lower on Wednesday, helped back below the 155.00 mark by lower core yields. Today’s selloff should snap a three-day winning streak for the pair and leave 156.74, the May 14 high and 157.00, a Fibonacci retracement as the key short-term levels on the topside as markets continue to weigh the MoF’s potential intervention plans versus the underlying drivers of central bank policy and yield differentials.
  • The preliminary reading of first quarter growth data in Japan is due overnight, which precedes Australian. In the US, jobless claims, Philly Fed and industrial production will cross Thursday, however, markets will likely be more concerned with comments from Fed officials following the latest inflation report.