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USD Index Rises 0.7% Following Above-Estimate Inflation Data

FOREX
  • The slightly firmer than expected US inflation data sparked a shift higher for US treasury yields and an associated recovery for the greenback. A persistent USD bid throughout the session tilted the USD index back into positive territory on the week and those moves extended in late trade amid the weakness for global equity benchmarks.
  • Equities weakness weighed substantially on the likes of AUD and NZD, which are registering losses of over 1.5% on the session as we approach the APAC crossover, with GBP closely behind, dropping 1.1% and back below the 1.2200 mark.
  • EURUSD’s traded with a renewed downward bias, sinking back to 1.0530 at typing, over a big figure from the earlier session highs.
  • In similar vein, USDJPY narrowed the gap once more to 150.00 with Japanese authorities reiterating that FX volatility is problematic and that currency adjustments must reflect fundamentals. USDJPY’s recovery from last Tuesday’s low at 147.43 is a bullish technical development and - for now - the uptrend remains in play. A clear break of the 150.00 handle would reinforce bullish conditions. The bull trigger is 150.16, the Oct 3 high and a break would initially open 150.40 and 151.09, both Fibonacci projections.
  • Reversing much of the prior positive sentiment earlier in the week, EM currencies such as MXN and ZAR were among the worst performers amid the higher US yields and waning equities.
  • Chinese CPI/PPI data will be released overnight on Friday, alongside September trade data. BOE Governor Bailey is due to speak at the Institute of International Finance Annual Membership Meeting, in Morocco. The US docket is highlighted by UMich consumer sentiment and inflation expectations.
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