Firmer CPI stalls the dollar's downturn.......>

FOREX: Firmer CPI stalls the dollar's downturn

-The greenback extended losses throughout the European morning, helping bump

EUR/USD to the week's highs of $1.1286 before June US inflation data slowed the

decline. M/M CPI came in at 0.1% vs. Exp. 0.0%, with core and Y/Y figures also

posting a 10bps beat. This helped slow the dollar's pullback, but the greenback

remained one of the poorest performers Thursday. Markets trimmed further their

expectations of a 50bps Fed rate cut in July, slipping to 24% from 29% this time

yesterday.

-ZAR outperformed EMFX space, benefiting from the release of a detailed proposal

to save beleaguered state-owned utility Eskom. This helped press USD/ZAR through

the mid-April lows to print down at 13.8576, the lowest since late February.

-Most other DM (and EMFX) currencies respected the recent range, prompting

short-end implied vols to slip further. AUD/USD 1m implied, for example, fell to

the lowest level in over 18 months.

-Focus turns to Japanese and EU industrial production figures, US PPI and

speeches scheduled from ECB's Visco, BoE's Vlieghe and Fed's Evans.