The US dollar falls due to mute inflation numbers
Wednesday 12 December, 2018
Daily Currency UpdateIt was a positive session for the US dollar yesterday, rising 0.36 percent; however, the US dollar index is falling 0.33 percent this morning. The consumer price index month to month came in at 0 percent, which was the same as expected, while the previous month was at 0.3 percent. At the same time, the core consumer price index came in at 0.2 percent, which was also the same as expected, while the last month was at 0.2 percent. There were no surprises. Global stocks experienced gains this morning on a fresh wave of trade optimism and climbing oil prices, shrugging off a leadership challenge against U.K. Prime Minister Theresa May.
Key MoversThe Loonie appreciates this morning while the USD/CAD falls 0.16 percent at the time of this writing. West Texas Intermediate Futures were up 1.5 percent at US$ 52.58 a barrel after weekly American Petroleum Institute figures revealed a larger-than-expected fall in U.S. inventories on Tuesday. The US dollar index fall is helping the Lonnie as well, given that the CPI numbers in the US came in at the same level as expected. Market participants are waiting for Canadian consumer price index numbers to be released next week to have a better view of where the USD/CAD is heading next. For now, the USD/CAD pair will have movements based on the US dollar drivers. Global stocks rose this morning on a fresh wave of trade optimism and shrugging off a leadership challenge against U.K. Prime Minister Theresa May. This "risk on" mood in financial markets is helping the Loonie.
The rhetoric from Italy around their budget stepped up considerably this week with Italy’s Di Maio yesterday announcing that the next few days will be crucial. It is very much the case as well that Italy is calling double standards pointing out that France will fail the EU’s budget rules, given Macron’s u-turn and relief on fuel tax rises alongside the promise of increasing the minimum wage. The EUR/USD is rising 0.37 percent to 1.1358, as there is no surprise in the inflation numbers in the US, which is weakening the US dollar along with all its crosses.
The rumor yesterday that 48 MPs had written letters of no confidence to Sir Graham Brady, Chairman of the 1922 Committee, has been confirmed this morning while traveling Europe to renegotiate her Brexit agreement. Additionally, it would appear that Theresa May has let her eye off the ball at home regarding the Irish backstop. This is the news that May would have been dreading, and despite Jacob Rees Mogg rallying his troops over three weeks ago, it would appear that Monday’s decision from May to postpone the Meaningful Vote has galvanized proceedings. This move has seen the Pound slip and retests the 20-month lows seen at the start of the week. The GBP/USD is rising strongly this morning, advancing as U.K. Prime Minister Theresa May faces a vote of no-confidence. The election is expected after the London close, around 1 pm - 3 pm, with results expected around 4 pm Eastern time.
The Aussie dollar took relief from the comments yesterday from Trump regarding progress with China. This was further supported by the news that Huawei’s CFO Meng Wanzhou is to be released on bail. Looping back to the US-China trade war, this is further proof and an indication that slow progress is being made. The AUD/USD is rising 0.26 percent to 0.7223 this morning.
The Kiwi mostly followed its Aussie neighbor yesterday, buoyed by the news that China-US relations eased. The Kiwi gained against the US dollar as risk sentiment waned while, against the Pound, the Kiwi’s performance was driven by events in the UK. However, The NZD/USD pair is falling 0.37 to 0.6848 this morning.
- USD/CAD: 1.3333 - 1.3386 ▼
- EUR/USD: 1.1300 - 1.1406 ▲
- GBP/USD: 1.2323 - 1.2886 ▲
- AUD/USD: 0.7162 - 0.7241 ▲
- NZD/USD: 0.6824 - 0.6891 ▼