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Greenback Plummets Following Soft CPI Report, Antipodean FX Surges

FOREX
  • Broad USD weakness has prevailed across global currency markets on Wednesday following the softer-than-expected US CPI data, both for headline and core readings. The USD index has fallen 1.15% as we approach the APAC crossover, with narrowing yield differentials further bolstering the JPY and firmer risk sentiment providing particularly strong tailwinds for Antipodean FX.
  • Both AUD & NZD have risen over 1.5% as the optimistic equity backdrop further complements the weaker greenback theme and underpins higher beta currencies. NZDUSD specifically has surged to a 7-week high, just hours after the RBNZ decision in which the central bank left policy unchanged for the first time since August 2021.
  • USDJPY has also extended its most recent downtrend, with the lower core yields allowing the pair to widen the gap to around 700 pips from the 145.07 highs seen just two weeks ago. The recent sell-off has resulted in a break of both the 20- and 50-day EMAs and price is again inside the bull channel drawn from the Jan 16 low. The move signals scope for an extension towards support at 137.47, the 4.0% 10-dma envelope - not crossed since 2020.
  • A notable mention for EURUSD which has risen to fresh highs for the year above 1.1125 and while GBP underperforms its G10 peers, cable did print a high of 1.3000, an important pivot point dating back to March 2022.
  • UK GDP data kicks off Thursday’s data calendar, as well as industrial production for both the UK and the Eurozone. The ECB minutes will be published before markets look for further signals on US inflation within the June PPI report.
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