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US dollar index is down -0.14% for the week

By OFX

Dollar bulls were dealt a blow yesterday as CPI from the States missed the target with the overall reading and the core reading printing 0.2% and 0.1% respectively, 0.1% lower than was expected for each. The dollar has been on a tear of late with the chances of four rate increases from the Fed currently around one in three. This soft print has seen USD/JPY again fail to breach 110 after coming within a hairsbreadth again yesterday; it has since retraced to around 109.35. EUR/USD has regained the 1.19 handle still highlighting the dollar run (for now) has run out of steam. There is no top-tier data from America today so politics and Trump will likely be the primary drivers for the dollar.

House Speaker Paul Ryan made the comment that a notice of a NAFTA deal must be given by May 17th for the current Congress to vote and pass it into law before a new Congress is sworn in this December.

Import Price for the US missed expectations of 0.5% with a print of 0.3%, yet better than last month’s miss of -0.2%. At 10 am today we have University of Michigan’s Consumer Sentiment expectations are for a reading of 98.4.

Canadian employment change was expected at 20k and posted a -1.1k, and the full employment change which represents the number of full-time positions last month published a 68.3k, and for this month and April's released at 28.8k, the Canadian unemployment rate remains at 5.8%.

The Canadian continues to find strength on the back of higher oil prices. West Texas Intermediate moves higher as speculation increases that a disruption in the Middle East supply is imminent.

It has been a quiet week in the Eurozone with little data of note and bank holidays leading to thin trading conditions. The main news over the past 24 hours has come from Italy where the anti-establishment Five Star Movement and right-wing League party are reportedly close to forming a coalition government after months of political wrangling.

There has been little reaction in the FX space after the reports however the spread on Italian and German yields is at its widest since March as investors begin to get a touch jittery over what the populist policies could mean to the country with Europe’s most substantial debt burden. EUR/USD hovers around the 1.19 handle with GBP/EUR around 1.1350.

Sterling wobbled yesterday as The Bank of England’s Monetary Policy Committee decided to keep rates on hold at 0.5%. The decision to stay put was no surprise. However, the accompanying Inflation Report, statement and press conference by Mark Carney highlighted how the economy had hit a soft patch of late adding drag to growth. A lot of this slack was put down to the bad weather seen in Q1 however recent poor data indicates this has rolled over to Q2 and can’t all be attributed to the Beast from the East. Markets still expect a 2018 rate rise. However, an August move now looks to be off the table leaving an 80% chance of a hike in November. The only data of note yesterday from the UK was Manufacturing Production m/m which dipped -0.1% slightly better than had been expected. GBP/USD continues to hover around the 1.35 handle.

Dollar bulls were dealt a blow yesterday as CPI from the States missed the target with the overall reading and the core reading printing 0.2% and 0.1% respectively, 0.1% lower than was expected for each. The dollar has been on a tear of late with the chances of four rate increases from the Fed currently around one in three.

This soft print has seen USD/JPY again fail to breach 110 after coming within a hairsbreadth again yesterday. It has since retraced to around 109.35. EUR/USD has regained the 1.19 handle still highlighting the dollar run (for now) has run out of steam. There is no top-tier data from America today so politics and Trump will likely be the primary drivers for the dollar.

The Australian dollar recouped losses suffered mid-week rebounding back above 0.75 U.S cents on Thursday. Softer than anticipated US inflation data for April befouled what has otherwise been a string of upbeat macroeconomic data sets for the world’s largest economy and dampened expectations the Fed will raise rates at a faster pace than first expected. The AUD rallied 1% for the day touching intraday highs at 0.7540.

The slowdown in consumer-led inflation mostly drove direction throughout the day and while y/y CPI held steady above 2% when adjusted for cyclical factors and annual adjustments inflations has seemingly moderated through the last three months. Couple this with a dip in 10 and 2-year treasury yields and demand for the world’s base currency waned, pulling the AUD off 11-month lows and encouraging some short-term upside.

Attentions now turn to US consumer sentiment for direction into the weekly close while RBA minutes, Quarterly Wage prices and Labour market data all fleck next week’s docket and provide possible markers for direction within recent ranges.

The New Zealand dollar continued its slide yesterday following the announcement of a more dovish policy in Governor Orrs first monetary policy statement whereby the RBNZ left interest rates on hold at 1.75%. After the initial gap lower to 0.6935 on open, we saw eventual lows of 0.6903 at the close of domestic play.

Despite Orr presenting a downgrade in future growth in his statement, Orr spoke later in the morning in front of the Finance and Expenditure select committee and suggested that the local economy was “Well balanced, employment very strong with inflation low and stable.” Furthermore, it is possible that the next movement in rates could be either up or down.

The Kiwi saw a slight recovery in overnight trading as United States inflation figures came in slightly below expectations and caused the US Dollar to pull off from recent highs. The New Zealand dollar opens this morning at 0.6965 ahead of the release of Business NZ Manufacturing Index and FPI figures for the month.