Daily Currency Update

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The Greenback pares gains after December inflation numbers rose less than forecasted.

USD - United States Dollar

The Greenback pares its advance after U.S. consumer prices rose 0.2 percent in December, less than the 0.3 percent estimated, and after core prices came in at 0.1 percent in the same month versus the 0.2 expected. The EUR/USD pair trades 0.22 percent lower, the EUR/CAD pair trades 0.1 percent lower, and the EUR/AUD trades 0.12 percent lower. The USD/JPY pair is marginally higher, around 110.00, but it was at 110.08 before the CPI numbers were released.

The most important data gathered this morning was from Futures traders, who have increased the amount of easing they expect from the Federal Reserve after the release of inflation figures. For instance, according to Bloomberg, Fed fund futures for January 2021 imply a rate of 1.335 percent at the end of 2020, compared with the rate of 1.345 percent before the release of consumer-price inflation data. This means that market participants expect further easing for this year, by at least 25 basis points.

Yesterday, two key comments were made by two different Fed officials. Raphael Bostic, President of the Atlanta Fed, said the economy is doing fine, no reason for the Fed to either stimulate or slow activity, while Eric Rosengren, President of the Boston Fed, said the prospect for above-target inflation and financial asset bubbles pose a higher risk to economic outlook than downside threats from trade disputes and sluggish global growth. It is well-known that Rosengren is one of the few Fed officials biased towards raising rates, while Bostic is more centrist, just like Jay Powell. In summary, their speeches pushed the U.S. dollar lower in yesterday's session.

The EUR/USD is erasing some loses at this moment trading at 1.1121 at the time of this writing.

Key Movers

The Australian dollar has been trading similarly to the Chinese Yuan over the last few months; however, the relationship is starting to fade away. As of today, the USD - Yuan currency pair is touching lows (strong Yuan), but the AUD/USD pair is trading in a pattern where it is reaching lower highs, which means that the Aussie dollar does not follow it anymore. Instead, bets that the RBA will restart easing of their monetary policy are increasing. At this moment, the AUD/USD trades at 0.6898.

Expected Ranges

USD/CAD: 1.3050 - 1.3083 ▲

EUR/USD: 1.1111 - 1.1137 ▼

GBP/USD: 1.2987 - 1.3055 ▲

AUD/USD: 0.6885 - 0.6916 ▲

NZD/USD: 0.6600 - 0.6637 ▼