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US dollar slips after weak inflation data

Daily Currency Update

The US dollar was seen sliding downward against its major peers after the US Bureau of Labor Statistics (BLS) released Consumer Price Index (CPI) data. According to this release, inflation declined to 4.9% year-over-year in April, from 5% in March. This reading came in slightly below the market expectation of 5%. On a monthly basis, the CPI and the Core CPI rose 0.4%, matching the market estimations. Apart from this release, the data showed that the benchmark 10-year US Treasury bond yields were down, reaching below 3.5%.

Another key data release was on the jobs front in the US, job creation exceeded the market expectations with 253,000 jobs added in the month of April while the jobless rate fell sharply to the lows of 3.4% (March being the lowest at 3.5%), as the unemployed numbers fell by 182,000 to 5.7 million. These key data releases will be an important factor when the Fed determines the extent of further rate hikes. Rising inflation and the stressed banking sector will continue to remain in focus. The US dollar index (DXY) is floating around 101.30 levels, down 0.32%.

Key Movers

The sterling climbed up to a five-month high against the euro as markets keep their hopes high for the upcoming Bank of England (BoE) meeting where a further rate increase is expected. There are strong bets on a 25 bps increase by the BoE tomorrow to cool the continuously rising inflation. GBP/USD jumped to a new 1 year high, trading at 1.2675 levels following the US CPI data release.

EUR/USD was seen rallying as well following the US CPI data, trading at 1.10050 levels. The euro did lose some ground against the greenback earlier during the European trading session. The final inflation numbers in Germany saw the CPI rising to 7.2% in April, up 0.4% from March. Industrial production in Italy contracted by 0.6% month-over-month in March and 3.2% from a year earlier. The European Central Bank (ECB) still maintains a hawkish view on rate hikes, like other major central banks.

USD/CAD edged slightly higher on Wednesday, although the pair struggles to take full advantage of the move and remained well under the 1.3400 levels. Though the Loonie did show some strength in the early trading sessions against the greenback on Wednesday. The yield on benchmark 10-year government bonds slipped 3.4 basis points to 2.922%. Crude oil was playing defense to save its gains as markets are awaiting the upcoming key oil inventory data. Crude oil inventories have fallen below the five-year average for the first time this year. Oil was last seen trading at 72.50 levels.

Expected Ranges

  • EUR/USD: 1.0943 - 1.1004 ▲
  • GBP/USD: 1.2605 - 1.2676 ▲
  • AUD/USD: 0.6745 - 0.6815 ▼
  • USD/CAD: 1.3337 - 1.3404 ▲