Home Daily Commentaries Producer Price Index data turns US dollar positive

Producer Price Index data turns US dollar positive

Daily Currency Update

The dollar index is up to above the 104 mark, approaching a 6-week high. This was in response to stronger-than-expected producer price inflation data, which reinforced expectations that the Federal Reserve will need to extend its tightening cycle. US producer prices increased 0.7% month-over-month in January, the biggest uptick in seven months and higher than the forecasted 0.4%. Recently released January data also showed the Producer Price Index declined to 6% from 6.5% in December. The U.S. weekly initial jobless claims also edged down only marginally from last week. Decreasing by 1,000 in the week ending on February 11th. Claims came in at 194,000 from the previous print of 195,000 and beating market expectations of 200,000. This week's retail sales report also showed the strength of the economy, leading experts to believe that the Federal Reserve has more room to hike rates.

Key Movers

EUR/USD fell from its previous day high close to 1.0713 levels, dropping below 1.06850. European Central Bank (ECB) member, Fabio Panetta, stated today that with inflation appearing to decelerate in the Eurozone, smaller interest rate hikes are now warranted. This statement was issued despite another 50 basis points increase expected at the next ECB meeting on March 16.

GBP/USD started the day trading steadily below 1.2065 after the previous day's release of inflation data pointed towards better-than-expected inflation figures. This inflation data raised hopes that the Bank of England (BoE) may soon conclude its interest rate hiking cycle at the next BoE meeting scheduled for March 23.

The Loonie has dipped to a six-day low against the U.S. dollar today as investors were jostled by American economic data. Bank of Canada Governor, Tiff Macklem, is set to appear before a parliamentary committee today. Prior to this slump, USD/CAD was trading above 1.34510 surpassing its previous week's high. After last week's strong employment report, investors are betting that the Canadian central bank will resume its interest rate hikes. Part of the earlier gains made today by crude oil prices were retracted as worries increased that economic challenges posed by climbing borrowing costs will damage fuel demand, leading to a weakening CAD. West Texas Intermediate (WTI) crude oil trades around 78.860.

Expected Ranges

  • EUR/USD: 1.0658 - 1.0716 ▼
  • GBP/USD: 1.1978 - 1.2065 ▼
  • AUD/USD: 0.6854 - 0.6933 ▼
  • USD/CAD: 1.3363 - 1.347 ▲