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US dollar sinks ahead of inflation data

USD - United States Dollar

Demand for the US dollar continued to drop against its major trading partners as investors look ahead to tomorrow’s consumer price index report to gauge inflation pressures.

April’s report is expected to show an accelerated pace of consumer price increases, with analysts expecting an uptick of 3.6% in prices in April from the same time last year. US Federal Reserve policymakers would like to see higher inflation, more wage growth and strong employment numbers for several months before considering any monetary policy changes, according to Chicago Fed Bank President Charles Evans yesterday.

USDCAD remains under pressure, trading at 1.208 this morning. The US Dollar Index traded at 90.09 this morning. The index measures the strength of the dollar against a basket of major currencies and is down 1.93% in the past month.

Key Movers

EURUSD rose to 1.217 this morning, supported by Europe's accelerating vaccination campaign. US dollar weakness across the board also bolstered the euro’s gains, along with data showing that German investor sentiment climbed to its highest level this month since the start of the pandemic.

Sterling rallied through 1.41 and 1.4150 as investors moved past another key risk event, the Scottish elections. The Scottish National Party fell just one seat short of securing an outright majority, making it much harder for pro-independents to mount another referendum for independence.

The Australian dollar marked a fresh two month high through trade yesterday, extending Friday’s upswing to test 0.7890. But AUD failed to hold onto gains through the overnight session, shifting back below 0.7840 amid mounting inflation fears.

Expected Ranges

EUR/USD: 1.212 - 1.217 ▲

GBP/USD: 1.410 - 1.415 ▲

AUD/USD: 0.782 - 0.787 ▲

USD/CAD: 1.208 - 1.212 ▼