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Greenback Spike Faded Following Above Estimate US Inflation

FOREX
  • US CPI surprised to the upside once more, illustrating the continued momentum for inflation in the US economy. As such, US yields spiked in a bear flattening move prompting an initial relief rally for the US dollar, that has been struggling over the past two weeks.
  • The US dollar index was boosted around 0.5% following the data with EURUSD trading down to 1.1375 and USDJPY breaking above the 1.16 handle to closely match the years highs around 1.1635.
  • Despite the downward momentum for US fixed income, renewed optimism for the greenback was short-lived. A very strong dollar reversal ensued, aided by a firm bounce off the lows for major equity indices.
  • The DXY fell around 0.85% which translated into EURUSD making fresh highs for the year at 1.1495 and USDJPY falling back below 116.
  • In a third major move for the session, Fed Bullard's comments on favouring a 50bp hike in March coupled with entertaining the option of inter-meeting increases sparked an equities selloff with the dollar regaining some poise, DXY now residing close to unchanged for Thursday.
  • EURUSD’s resilient price action appears to be confirming a bull flag continuation pattern. Once through the day’s high and pivot resistance at 1.1495, the focus will be on 1.1558, a Fibonacci retracement.
  • The Swedish krona was the clear underperformer on Thursday, with gains for EURSEK totalling 2.15% approaching the end of the trading day. Following the riksbank meeting, analysts suggested that set against the increasingly hawkish major central banks, Thursday's Riksbank meeting had erred more on the dovish side than markets had expected.
  • Overnight, potential comments from RBA Governor Lowe, due to testify at a virtual hearing before the House of Representatives Standing Committee on Economics. Inflation expectations for New Zealand will also be released before UK publishes growth data at the start of the European session.
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