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Initial Euro Strength Reverses, G10 Ranges Contained

FOREX
  • Currency markets traded in a subdued manner on Tuesday, with major pairs contained to narrow ranges ahead of the US inflation data tomorrow.
  • There was some early Euro strength throughout the European session which saw EURUSD rise around 50 pips from 1.02 to a 1.0247 high and notably back above pre-NFP levels ~1.0230. The single currency bid helped the likes of EURAUD reverse a solid portion of the prior day’s retreat.
  • This price action initially kept the USD index on the back foot for much of the session, however, a slow grind lower across major equity indices bolstered the greenback, with the DXY eventually turning positive nearing the APAC crossover. This led EURUSD back to levels just above the 1.0200 mark with the pair settling in the middle of its 1.0100-1.0300 range which it has respected for the past 16 trading days.
  • AUDUSD (-0.49%) is the notable laggard, however, price action remains well within the bounds of Monday’s range. Very tentative price action in USDJPY, trading blows either side of the 135.00 mark and registering a significantly smaller 52-pip range on the day.
  • The obvious potential catalyst for renewed currency volatility on Wednesday lies in the form of US inflation data at 1330BST/0830ET. Consensus shows headline CPI easing to +0.2% M/m from an unwind in energy prices, whilst core CPI is seen slowing from 0.7% to 0.5% M/m following three sizeable consecutive beats.
  • There will also be Chinese CPI/PPI data released during the APAC session overnight.
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